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United States Government Accountability Office:
GAO:
Report to the Chair, Committee on Small Business and Entrepreneurship,
U.S. Senate:
June 2011:
Small Business Contracting:
Action Needed by Those Agencies Whose Advocates Do Not Report to
Agency Heads as Required:
GAO-11-418:
GAO Highlights:
Highlights of GAO-11-418, a report to the Chair, Committee on Small
Business and Entrepreneurship, U.S. Senate.
Why GAO Did This Study:
Section 15(k) of the Small Business Act requires that all federal
agencies with procurement powers establish an Office of Small and
Disadvantaged Business Utilization (OSDBU) to advocate for small
businesses. Section 15(k)(3) requires that OSDBU directors be
responsible only to and report directly to agency or deputy agency
heads. GAO was asked to assess agencies’ compliance with the reporting
structure and identify the functions OSDBUs performed. GAO reviewed
compliance with section 15(k)(3) at 16 agencies—the 7 agencies that
each procured more than $15 billion in goods and services in 2009 and
9 that it had previously reported were not complying with this
requirement. GAO also surveyed the OSDBU directors at 25 agencies that
represented more than 98 percent of civilian obligations and 90
percent of DOD obligations in 2009.
What GAO Found:
Nine of the 16 federal agencies that GAO reviewed were in compliance
with section 15(k)(3) of the Small Business Act, which requires OSDBU
directors to be responsible only to and report directly to the agency
or deputy agency head (see table). The remaining seven agencies were
not in compliance with the provision, and their OSDBU directors
reported to lower-level officials or had delegated OSDBU
responsibilities to officials who did not meet the reporting
requirement. These agencies were not in compliance when GAO last
examined them in 2003. During GAO’s current review, directors who
reported to agency heads cited benefits to the relationship, while
those who did not had mixed views. GAO concluded that the views
expressed by the directors at noncompliant agencies did not justify
noncompliance and that these agencies should comply or provide support
to Congress of their need, if any, for statutory flexibilities.
Ongoing noncompliance with section 15(k)(3) undermines the intent of
the act and may prevent some OSDBU directors from having direct access
to top agency management.
Table: Agency Compliance with Section 15(k)(3) of the Small Business
Act:
Agencies in compliance (9):
Defense Logistics Agency[A];
Department of Education;
Department of Energy[A];
Department of Health and Human Services[A];
Department of the Air Force[A];
Department of the Army[A];
Department of the Navy[A];
Environmental Protection Agency
National Aeronautics and Space Administration[A].
Agencies not in compliance (7):
Department of Agriculture;
Department of Commerce;
Department of Justice;
Department of State;
Department of the Interior;
Department of the Treasury;
Social Security Administration (SSA).
Source: GAO analysis.
[A] Agencies that procured more than $15 billion in goods and services
in fiscal year 2009; together they accounted for about 76 percent of
all federal contracting.
[End of table]
Consistent with its 2004 report, GAO’s current work found that the 25
OSDBU directors surveyed focused their procurement activities on
certain functions listed in section 15(k). At least 19 directors
listed the five functions related to contract bundling, maintaining
supervisory authority over staff, and helping small businesses obtain
payments from agencies as among their duties. Fewer directors viewed
the remaining three functions, such as reviewing acquisitions for
small business set-asides and assisting small businesses to obtain
payments from prime contractors, as duties. Directors who did not view
these functions as their responsibility generally noted that
contracting or program staff performed them. Whether OSDBU directors
who do not perform certain functions listed in 15(k) are complying
with the statute is not clear.
What GAO Recommends:
GAO recommends that agencies not in compliance with section 15(k)(3)
take steps to comply with this statutory requirement or report to
Congress on why they have not complied, including any requests for
statutory reporting flexibility as appropriate. SSA agreed with the
recommendation, and Interior agreed to reevaluate its reporting
structure. Commerce, Justice, State, and the Treasury disagreed,
believing they were in compliance. GAO maintains its position on
agencies’ compliance status, as discussed further in the report.
Agriculture did not comment.
View [hyperlink, http://www.gao.gov/products/GAO-11-418] or key
components. To view survey results, click on GAO-11-436SP. For more
information, contact William B. Shear at (202) 512-8678 or
shearw@gao.gov. [End of section]
Contents:
Letter:
Background:
More Than Half of OSDBU Directors Reviewed Reported Only to Their
Agency or Deputy Agency Head:
Survey Results Showed That Most OSDBUs Continued to Focus Their
Procurement Activities on Five Functions:
OSDBUs Collaborated to Promote Small Business Contracting, but Some
Directors Reported Staffing and Funding Challenges:
Conclusions:
Recommendation for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Scope and Methodology:
Appendix II: Reporting Relationships at Seven Agencies Not in
Compliance with Section 15(k)(3):
Appendix III: Office of Small and Disadvantaged Business Utilization
Directors Who Reported that They Did Not Carry Out Certain 15(k)
Functions:
Appendix IV: Comments from the Department of Education:
Appendix V: Comments from the Department of Commerce:
Appendix VI: Comments from the Department of the Interior:
Appendix VII: Comments from the Department of Justice:
Appendix VIII: Comments from the Department of State:
Appendix IX: Comments from the Department of the Treasury:
Appendix X: Comments from the Social Security Administration:
Appendix XI: GAO Contact and Staff Acknowledgments:
Tables:
Table 1: Summary of Agency Compliance with Section 15(k)(3) of the
Small Business Act, as of April 2011 1:
Table 2: Extent to Which 25 OSDBU Directors Surveyed Performed 15(k)
Contract Bundling and Payment Assistance Functions 1:
Table 3: Small Business Contracting at Agencies Surveyed by GAO,
Fiscal Year 2009 1:
Table 4: Challenges Reported by OSDBU Directors in Carrying Out Their
Responsibilities 1:
Table 5: OSDBU Full-Time Equivalent Staff, Fiscal Years 2006 to 2010 1:
Table 6: OSDBU Budgets, Fiscal Years 2006 to 2010 1:
Table 7: 25 Federal Agencies at Which GAO Conducted Work 1:
Figures:
Figure 1: Survey Results from OSDBU Directors on Section 15(k)
Functions 1:
Figure 2: OSDBU Directors Reporting That Duties Other Than 15(K)
Requirements Were Functions of Their Offices 1:
Figure 3: OSDBU Director's Reporting Relationship at the Department of
Commerce, as of April 2011 1:
Figure 4: OSDBU Director's Reporting Relationship at the Department of
the Interior, as of April 2011 1:
Figure 5: OSDBU Director's Reporting Relationship at the Department of
Justice, as of April 2011 1:
Figure 6: OSDBU Director's Reporting Relationship at the Social
Security Administration, as of April 2011 1:
Figure 7: OSDBU Director's Reporting Relationship at the Department of
Agriculture, as of April 2011 1:
Figure 8: OSDBU Director's Reporting Relationship at the Department of
State, as of April 2011 1:
Figure 9: OSDBU Director's Reporting Relationship at the Department of
the Treasury, as of April 2011 1:
View GAO-11-418 key component:
Small Business Contracting: Survey of 25 Agency Advocates [hyperlink,
http://www.gao.gov/products/GAO-11-436SP], June 2011), an E-supplement
to GAO-11-418.
Abbreviations:
DLA: Defense Logistics Agency:
DOD: Department of Defense:
EPA: Environmental Protection Agency:
FAR: Federal Acquisition Regulation:
HHS: Department of Health and Human Services:
HUBZone: Historically Underutilized Business Zone:
HUD: Department of Housing and Urban Development:
NASA: National Aeronautics and Space Administration:
OPM: Office of Personnel Management:
OSDBU: Office of Small and Disadvantaged Business Utilization:
PMR: program management review:
SBA: Small Business Administration:
SSA: Social Security Administration:
USAID: U.S. Agency for International Development:
VA: Department of Veterans Affairs:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
June 3, 2011:
The Honorable Mary L. Landrieu:
Chair:
Committee on Small Business and Entrepreneurship:
United States Senate:
Dear Madam Chair:
Maximizing contracting opportunities for small businesses has been a
long-standing policy of the federal government. To help ensure that
small businesses receive a share of federal procurement contract
dollars, Congress has set an annual governmentwide goal of awarding
not less than 23 percent of prime contract dollars to small
businesses.[Footnote 1] Congress has also mandated that the Small
Business Administration (SBA) negotiate annual procurement goals with
each federal agency. In fiscal year 2009, small businesses accounted
for almost $100 billion in federal contracts--about 22 percent of all
federal prime contracts awarded.
To increase small businesses' visibility within federal agencies, in
1978 Congress amended the Small Business Act to require that all
federal agencies with procurement powers establish an Office of Small
and Disadvantaged Business Utilization (OSDBU), which would advocate
for small businesses within the agencies[Footnote 2]. The OSDBU is
managed by a director who is responsible for implementing and
executing the agency's functions and duties related to the award of
contracts and subcontracts to small and disadvantaged businesses.
Section 15(k)(3) of the act requires that OSDBU directors be
responsible only to and report directly to agency heads or their
deputies.[Footnote 3] The purpose of this provision is to help ensure
that OSDBU directors have direct access to their agencies' top
decision makers in order to advocate effectively. Section 15(k), as
amended, also lists a number of functions that OSDBU directors are
responsible for in carrying out their roles as advocates for small
businesses.[Footnote 4]
In two earlier reports, we reviewed federal agencies' compliance with
the Small Business Act and the extent to which OSDBU directors viewed
the functions listed in section 15(k) as duties of their offices. In
September 2003, we reported on the OSDBUs at 24 federal agencies and
found that 11 of these offices did not comply with the law's
requirement that the OSDBU director report directly to and be
responsible only to the agency head or deputy head.[Footnote 5] We
recommended that 10 agency heads take steps, as necessary, to comply
with the requirement.[Footnote 6] However, 8 of the 10 disagreed with
our recommendation.[Footnote 7] In a follow-on March 2004 report, we
noted that almost all of the 24 OSDBU directors surveyed reported that
they viewed most of the functions outlined in the Small Business Act
as current duties of their offices.[Footnote 8] Most of the OSDBU
directors we surveyed reported that their offices faced few challenges
to carrying out their responsibilities, but some reported challenges
in three areas--lack of influence in the procurement process, limited
budgetary resources, and lack of adequate staff.
For this report, you asked us to review OSDBU practices for carrying
out the requirements of the Small Business Act at federal agencies
with major contracting activity. Specifically, we (1) assessed whether
the director reported directly to the agency head or the deputy head,
(2) determined the functions conducted by the OSDBUs, and (3) examined
the actions taken by the OSDBUs and other officials at the various
agencies to further small business contracting opportunities and the
effects of funding and staff levels on these efforts.
To address these objectives, we focused our review on the seven
agencies that procured more than $15 billion in goods and services in
fiscal year 2009: the Defense Logistics Agency (DLA); the Departments
of the Air Force, the Army, Energy, Health and Human Services (HHS),
and the Navy; and the National Aeronautics and Space Administration
(NASA).[Footnote 9] To assess whether the directors were responsible
only to and reported directly to the agency head or the deputy head as
required by section 15(k)(3) of the Small Business Act, we included an
additional nine agencies that we reported in September 2003 were not
complying with this requirement. We determined that agencies were in
compliance if the designated OSDBU directors both exercised OSDBU
responsibilities and reported directly to and were responsible only to
the agency head or the agency head's deputy as the act requires. To
determine whether OSDBU directors were in compliance with section
15(k)(3), we interviewed the designated directors to identify the
official(s) they had reported to in fiscal year 2010 and asked them to
provide information characterizing the reporting relationship, such as
the extent to which small business issues were discussed. In addition,
we reviewed documentary evidence, including organization charts and
OSDBU directors' performance appraisals and position descriptions.
To determine the functions conducted by the OSDBUs, we surveyed the
OSDBU directors at 25 agencies on their offices' duties and functions.
The 25 agencies included all 20 civilian agencies that procured more
than $800 million in goods and services in fiscal year 2009, as well
as the Department of Defense (DOD)--Office of the Secretary; the
Departments of the Air Force, Army, and Navy; and DLA.[Footnote 10] We
received responses from all 25 OSDBU directors, for a response rate of
100 percent. The survey was similar to one we administered in 2003 and
asked the directors about their functions in three areas: (1)
participation in the agency procurement process, (2) facilitation of
small business participation in agency contracting, and (3)
interaction with SBA. The three areas covered OSDBU functions listed
in the Small Business Act as well as additional functions that OSDBUs
might perform. The purpose of the survey was to obtain the views of
OSDBU directors on their roles and responsibilities. In addition, the
survey asked the directors what challenges they faced in carrying out
their responsibilities. In certain instances, we conducted follow-up
interviews to clarify responses.[Footnote 11]
To examine the actions taken by the OSDBU and other agency officials
to further small business contracting opportunities and determine how
funding and staff levels affected these efforts, we reviewed the
survey responses from the 25 OSDBU directors. To determine actions
taken by top management to further small business contracting, we
reviewed documents, including policy statements, at the seven agencies
with major contracting activity. We also interviewed the OSDBU
directors at these agencies on the actions they and other agency
officials had taken to further small business contracting; methods
used by the agency and SBA to hold officials accountable for
furthering small business contracting; and challenges that may have
affected these efforts, such as funding and staffing levels.[Footnote
12] Appendix I contains additional information on our scope and
methodology.
We conducted our work from June 2010 to May 2011 in accordance with
generally accepted government auditing standards. Those standards
require that we plan and perform the audit to obtain sufficient,
appropriate evidence to provide a reasonable basis for our findings
and conclusions based on our audit objectives. We believe the evidence
obtained provides a reasonable basis for our findings and conclusions
based on our audit objectives.
Background:
The Business Opportunity Development Reform Act of 1988 amended the
Small Business Act to establish an annual governmentwide goal of
awarding not less than 20 percent of prime contract dollars to small
businesses. The Small Business Reauthorization Act of 1997 further
amended the Small Business Act to increase this goal to not less than
23 percent. To help meet this goal, SBA annually establishes prime
contract goals for various categories of small businesses for each
federal agency.[Footnote 13] Although SBA is responsible for
coordinating with executive branch agencies to move the federal
government toward this mandated goal, agency heads are responsible for
achieving the small business goals with their agencies.
A 1978 report by the Senate Select Committee on Small Business noted
that officials who were responsible for advocating for small business
participation in federal government procurement often did not hold
positions that were high enough in the agency structure to be
effective. The 1978 amendment to the Small Business Act that
established section 15(k)(3) addressed this issue by establishing a
direct reporting relationship between the OSDBU director and the
agency head or deputy head. The statute, as amended, specifies that
the director would have supervisory authority over OSDBU staff,
implement and execute the functions and duties under the relevant
sections of the Small Business Act, and identify proposed
solicitations that involved the bundling of contract requirements.
(The Small Business Reauthorization Act of 1997 defines the bundling
of contract requirements as the consolidation of two or more
procurement requirements for goods or services previously provided or
performed under separate smaller contracts into a solicitation of
offers for a single contract that is likely to be unsuitable for award
to a small business concern for various reasons.)
Section 15(k) of the Small Business Act lists eight functions of OSDBU
directors, as follows:
* Identifying proposed solicitations that involve significant bundling
of contract requirements.
* Working with agency procurement officials to revise such proposed
solicitations to increase the probability of participation by a small
business.
* Facilitating the participation of small businesses as subcontractors
if solicitations for bundled contracts are to be issued.
* Assisting small businesses in obtaining payments from an agency with
which it has contracted.
* Helping small businesses acting as subcontractors to obtain payments
from prime contractors.
* Making recommendations to contracting officers as to whether
particular requirements should be set-aside for small businesses.
[Footnote 14]
* Maintaining supervisory authority over OSDBU personnel.
* Cooperating and consulting on a regular basis with SBA in carrying
out OSDBU functions and duties under the Small Business Act and
assigning a small business technical advisor to each office with an
SBA-appointed procurement center representative. (A procurement center
representative is an SBA staff member assigned to federal buying
activities with major contracting programs to carry out SBA policies
and programs.)
The Federal Acquisition Regulation (FAR) establishes uniform policies
for acquisition of supplies and services by executive agencies.
Section 19.201(d) of the FAR is the implementing regulation for
section 15(k) of the Small Business Act. In addition, agencies have
their own regulations for carrying out procurement activities, such as
the Defense Federal Acquisition Regulation Supplement for the
Department of Defense. For the purpose of our 2003 and 2010 surveys,
we divided the procurement process into four steps:
* Acquisition planning involves developing an overall management
strategy for the procurement process for a potential contract. It
takes place well in advance of a contract's award date and generally
involves both a close partnership between the program and procurement
offices and the involvement of other key stakeholders.
* Solicitation development is the process of preparing requests for
vendors to submit offers, or bids.
* Proposal evaluation occurs after potential contractors submit
proposals that outline how they will fulfill the solicitation
requirements. Agency personnel evaluate proposals for award and
contracting officers award the contract.
* Monitoring, also known as surveillance, helps to determine a
contractor's progress and identify any factors that may delay
performance.
To carry out the functions listed in section 15(k) of the Small
Business Act, OSDBU directors provide advice on small business matters
and collaborate with the small business community. Some of the primary
duties of OSDBU directors include advising agency leadership on small
business matters; providing direction for developing and implementing
policies and initiatives to help ensure that small businesses have the
opportunity to compete for and receive a fair share of agency
procurement; representing the agency at meetings, workgroups, and
conferences related to small business; initiating and building
partnerships with the small business community; providing agency
acquisition and program personnel with leadership and oversight of
education and training related to small business contracting;
conducting reviews of small business programs; and serving as the
agency liaison to SBA, including providing annual reports on agency
activities, performance, and efforts to improve performance.
OSDBU directors are not the only officials responsible for helping
small businesses participate in federal procurement. At the agency
level, the heads of procurement departments are responsible for
implementing the small business programs at their agencies, including
achieving program goals. Generally, staff within agency procurement
departments who are assigned to work on small business issues (small
business specialists) coordinate with OSDBU directors on their
agencies' small business programs.
More Than Half of OSDBU Directors Reviewed Reported Only to Their
Agency or Deputy Agency Head:
We found that 9 of the 16 agencies we reviewed were in compliance with
the Small Business Act's requirement that OSDBU directors be
responsible only to and report directly to the agency or deputy agency
head (see table 1).[Footnote 15] We determined that the remaining
seven agencies were not in compliance. These agencies, which use
various reporting structures, also were not in compliance in 2003,
when we last assessed the reporting structure. The OSDBU directors at
the compliant agencies cited benefits to the reporting relationship.
OSDBU directors at agencies that were not complying with section
15(k)(3) differed in their views of the importance of reporting to the
agency head or deputy head.
Table 1: Summary of Agency Compliance with Section 15(k)(3) of the
Small Business Act, as of April 2011:
Agencies in compliance (9):
Defense Logistics Agency[A];
Department of Education;
Department of Energy[A];
Department of Health and Human Services[A];
Department of the Air Force[A];
Department of the Army[A];
Department of the Navy[A];
Environmental Protection Agency
National Aeronautics and Space Administration[A].
Agencies not in compliance (7):
Department of Agriculture;
Department of Commerce;
Department of Justice;
Department of State;
Department of the Interior;
Department of the Treasury;
Social Security Administration (SSA).
Source: GAO analysis.
[A] Agencies that procured more than $15 billion in goods and services
in fiscal year 2009.
[End of table]
Because all seven noncompliant agencies were also not in compliance
when we reviewed them in 2003, we recommended at that time that they
take steps as necessary to comply with the requirement in section
15(k)(3). Most of the agencies disagreed with our conclusion that the
reporting relationships did not comply with section 15(k)(3) of the
Small Business Act. However, none of the legal arguments that the
agencies raised caused us to revise our conclusions or
recommendations. For example, the Department of the Interior stated
that the Assistant Secretary to whom the OSDBU director reported was
the agency head for acquisition matters, in accordance with the FAR.
We responded that Interior's designation of the Assistant Secretary as
its "agency head" for procurement powers did not mean that the person
thereby became its agency head for purposes of section 15(k)(3).
Several agencies also commented on the effectiveness of their small
business programs and reporting structure. During our interviews for
this report, officials generally did not state that their agencies
were complying with the requirement. Rather, they commented on how
their current reporting structures were working. For example,
officials at five agencies stated that small business matters were not
suffering as a result of the structure.
OSDBU Directors at Nine Agencies Reported Directly to the Agency or
Deputy Agency Head:
Documentation from nine agencies indicated that the OSDBU directors
reported directly to and were responsible only to the agency head or
the deputy head when carrying out OSDBU duties and functions. Seven of
these agencies--the Departments of the Air Force, the Army, Energy,
and the Navy; DLA; HHS; and NASA--procured more than $15 billion in
goods and services in fiscal year 2009. The remaining agencies, the
Department of Education and the Environmental Protection Agency (EPA),
procured about $1.5 billion and $1.8 billion, respectively, in fiscal
year 2009. The organization charts for these nine agencies showed a
direct link between the OSDBU directors and the agency heads or deputy
heads. The agency heads or deputy heads also rated the OSDBU
directors' performance at these agencies, and OSDBU reports and
memoranda were provided to them.
At NASA, the OSDBU director reported directly to the
Administrator.[Footnote 16] The organization chart showed a direct
link from the OSDBU to the Office of the Administrator, and the
Administrator signed the OSDBU director's most recent performance
appraisal. During our review, DLA revised the position description of
the OSDBU director to make it clear that the director reported to the
Vice Director and that the Vice Director would rate the director's
performance.[Footnote 17] At the remaining seven agencies, the OSDBU
directors reported to the Deputy Secretary. For instance, at the
Departments of the Air Force, Army, and Navy, the OSDBU directors
reported to the Under Secretary for their respective departments, and
the Under Secretary signed their performance appraisals. At Energy and
HHS, the OSDBU directors reported to the Deputy Secretary, who also
assessed their performance. In our 2003 report, we concluded that the
Department of Education was not in compliance with section 15(k)(3).
At that time, the OSDBU director did not report only to the Deputy
Secretary but also reported to the Deputy Secretary's Chief of Staff.
Since then, the agency has changed its reporting structure to ensure
that the OSDBU director is responsible only to the Deputy Secretary.
The OSDBU director stated that she now had direct access to the Deputy
Secretary, meeting with him for routine discussions about small
business activities and related issues. In addition, the Deputy
Secretary signed her performance appraisals. We also concluded in 2003
that EPA was not in compliance because the OSDBU director was not
responsible only to the Administrator or Deputy Administrator. At that
time, the OSDBU director told us she reported to the Deputy Chief of
Staff, who also evaluated the OSDBU director's performance. For this
review, the OSDBU director told us that, while some matters were
routed through the Deputy Chief of Staff, she ultimately reported to
the Deputy Administrator. The Deputy Administrator signed her two most
recent performance appraisals.
The Seven Agencies That Were Not in Compliance Had a Variety of
Reporting Arrangements:
As shown in table 1, seven agencies were not in compliance with
section 15(k)(3). All of these agencies were also not in compliance in
2003. As in our prior report, we found that a variety of reporting
structures were in place. OSDBU directors either reported to lower-
level officials than the agency head or deputy or had delegated their
OSDBU director responsibilities to officials who did not report to
either the agency head or the deputy head. However, these arrangements
do not meet the law's intent and undermine the purpose of section
15(k)(3). To help ensure that the OSDBU's responsibilities are
effectively implemented, the act mandates that the OSDBU director--
that is, the person actually carrying out the responsibilities--have
direct access and be responsible only to the agency head or deputy.
Appendix II provides details of the reporting arrangements at each
agency.
OSDBU Directors at Four Agencies Did Not Report Directly to the Agency
Head or Deputy Head:
At the Departments of Commerce, the Interior, and Justice and the
Social Security Administration (SSA), the OSDBU directors reported to
officials at lower levels than the agency head or deputy head. For
example, at the Department of Commerce, the organization chart showed
that the OSDBU director reported to two lower-level officials--the
Deputy Assistant Secretary for Administration and the Assistant
Secretary for Administration. At the Department of the Interior, the
OSDBU director reported to the Deputy Assistant Secretary for Budget,
Finance, Performance, and Acquisition and to the Assistant Secretary,
Policy, Management and Budget. At the Justice Department, OSDBU
officials told us that the current reporting structure was the same as
in 2003. The OSDBU is located within the Justice Management Division,
with the director under the supervision of the Deputy Assistant
Attorney General for Policy, Management and Planning. SSA also had the
same reporting structure that we documented in our 2003 report, with
the OSDBU director reporting to the Deputy Commissioner, Office of
Budget, Finance and Management, who is one of nine deputy
commissioners managing programs and operations.
OSDBU Directors at Three Agencies Delegated Their OSDBU
Responsibilities to Lower-Level Officials:
The designated OSDBU directors at the Departments of Agriculture,
State, and the Treasury delegated their responsibilities to officials
who did not directly report to either the Secretaries or Deputy
Secretaries. These arrangements were the same as those we determined
in 2003 were not in compliance with the Small Business Act. At these
agencies, an Assistant Secretary who managed the agency's
administrative functions was designated as the statutory OSDBU
director. The Assistant Secretaries then delegated nearly all of their
OSDBU responsibilities to lower-ranking officials who reported
directly to the Assistant Secretaries. The lower-ranking officials
thus became the de facto OSDBU directors. At the Department of
Agriculture, for example, the designated OSDBU director was the
Assistant Secretary for Administration, who reported to the Secretary
and Deputy Secretary. However, the Assistant Secretary had delegated
nearly all of his OSDBU responsibilities to a lower-level official who
did not have direct access to the agency head or deputy head. At the
Department of State, the Assistant Secretary for Administration was
the designated OSDBU director. The Assistant Secretary, who reported
to one of the department's two Deputy Secretaries on small business
matters, had delegated his OSDBU responsibilities to the Operations
Director for the OSDBU, who reported directly to him. At Treasury, the
Assistant Secretary of the Treasury for Management/Chief Financial
Officer/Chief Performance Officer was the designated OSDBU director.
However, the Director of the Office of Small Business Programs, an
official who did not directly report to either the Secretary or the
Deputy Secretary, was responsible for the day-to-day management of
Treasury's small business programs. The Director of the Office of
Small Business Programs told us she spent 100 percent of her time on
small business issues.
While Views Varied on the Importance of Reporting Only to the Agency
Head or Deputy Head, the Small Business Act Requires It:
OSDBU directors' opinions varied on the importance of reporting only
to the agency head or deputy head. The OSDBU directors at the nine
agencies that were complying with section 15(k)(3) cited positive
elements to this reporting relationship. Five of the nine OSDBU
directors stated that reporting to the agency head or deputy showed
top-level support for small business efforts that sent a message to
the rest of the agency. For example, one OSDBU director explained that
reporting directly to the agency head or deputy head helped ensure
that he was viewed as equal to other senior managers. He noted that
this relationship was important because it allowed him to participate
in senior management meetings where decisions were made. Another OSDBU
director stated that she had a strong relationship with senior
management and did not hesitate to invite senior leaders to
participate in small business outreach events. She added that if she
did not report to the agency head or deputy, she would lose this
rapport with senior leadership.
OSDBU directors at the seven agencies that were not complying with
section 15(k)(3) differed on the importance of reporting to the agency
head or deputy head. For example, two of these OSDBU directors thought
that not reporting to the agency head or deputy was a problem. One
director stated that reporting to the agency head or deputy could
provide the OSDBU with more authority and enable it to collaborate
more effectively with other offices. The other director noted that
being too far down the reporting structure meant that she could not
independently voice her opinion, especially when it differed from her
supervisor's. The OSDBU directors at the other five agencies did not
see problems with the existing structure, stating that small business
matters were not suffering as a result of the structure. For instance,
one director stated that his agency's structure worked well and that
the agency's small business initiatives were resulting in high marks
on the SBA scorecard and effective relationships with other agency
officials.[Footnote 18] This official noted that if he were to report
directly to the Secretary or Deputy Secretary, small business efforts
would compete against significant national foreign policy priorities.
Another director stated that the OSDBU was getting all of the support
it needed under the current reporting relationship. The director
further explained that the office did not have a problem with
resources and that he had a strong relationship with his supervisor.
Additionally, he noted that any areas needing attention were
communicated to higher management. Yet another director stated that
his agency had a successful small business procurement program. He
also cited accomplishments such as meeting small business contracting
goals and increasing the number of small businesses with which the
agency interacted.
However, the Small Business Act requires that the OSDBU director have
direct access to the agency head or deputy to help ensure that the
OSDBU's responsibilities are effectively implemented. As such, the
statements made by the OSDBU directors at these five agencies do not
justify their noncompliance with section 15(k)(3). SBA officials said
the agency had also raised concerns about compliance with the
reporting requirement during its surveillance reviews of federal
agencies. These reviews are evaluations of small business contracting
that assess (1) management of the small business programs, (2)
compliance with regulations and published policies and procedures, (3)
outreach programs focusing on small businesses, and (4) procurement
documentation. When SBA finds that an agency does not have the
required reporting relationship, it identifies this as a deficiency in
the review report. Ongoing noncompliance with section 15(k)(3)
undermines the intent of the act and may prevent some OSDBU directors
from having direct access to top agency management. Given how long
these agencies have not been in compliance with the requirement, at a
minimum they have an obligation to explain their noncompliance to
Congress and provide support for their need, if any, for greater
statutory flexibility in establishing a reporting structure for their
OSDBU director.
Survey Results Showed That Most OSDBUs Continued to Focus Their
Procurement Activities on Five Functions:
Like the results of our 2003 survey, the responses of the 25 OSDBU
directors we surveyed in 2010 indicated that they generally focused
their procurement activities on the functions listed in section 15(k)
of the Small Business Act. Most OSDBU directors reported they viewed
five of the eight functions identified in section 15(k) as among their
offices' current duties, but the extent to which the individual OSDBUs
carried out each activity varied. Directors who did not view a section
15(k) function as their responsibility generally reported that
contracting, acquisition, or program staff performed it. Section 15(k)
lists the functions of OSDBU directors but does not necessarily
require them to personally carry out these activities themselves. Few
OSDBU directors viewed non-15(k) procurement activities such as
developing solicitations and evaluating proposals as roles of their
OSDBU.
Nearly All OSDBU Directors Surveyed Reported Their Offices Performed
Five of the Eight Functions Identified in the Small Business Act:
For this report, we asked 25 OSDBU directors which of the
responsibilities listed in the Small Business Act they saw as
responsibilities of their offices. As shown in figure 1, at least 19
of the 25 OSDBU directors that we surveyed reported they viewed five
of the eight functions identified in section 15(k) of the Small
Business Act as current duties of their office. These five functions
included (1) having supervisory authority over OSDBU staff, (2) three
functions involving contract bundling (that is, the consolidation of
two or more procurement requirements for goods or services previously
provided under separate smaller contracts),[Footnote 19] and (3)
assisting small businesses to obtain payments from agencies. Fewer
OSDBU directors (10 to 18) viewed the remaining three functions--
reviewing individual acquisitions for small business set-asides,
assisting small businesses to obtain payments from prime contractors,
and assigning a small business technical advisor to offices with an
SBA representative--as their responsibilities. The data show little
change from the responses to our 2003 survey.
Figure 1: Survey Results from OSDBU Directors on Section 15(k)
Functions:
[Refer to PDF for image: horizontal bar graph]
Section 15(k) function: Supervisory authority over personnel with the
duties and functions of the OSDBU;
Yes, this function is a duty of the OSDBU director:
2010 (Total respondents: 25): 24;
2003 (Total respondents: 24): 22;
No, this function is not a duty of the OSDBU director:
2010 (Total respondents: 25): 1[A];
2003 (Total respondents: 24): 2.
Section 15(k) function: Attempting to identify solicitations that
involve bundling of contract requirements;
Yes, this function is a duty of the OSDBU director:
2010 (Total respondents: 25): 24;
2003 (Total respondents: 24): 21;
No, this function is not a duty of the OSDBU director:
2010 (Total respondents: 25): 1[B];;
2003 (Total respondents: 24): 3.
Section 15(k) function: Working with agency acquisition officials to
revise procurement strategies for bundled contract requirements to
increase small business participation;
Yes, this function is a duty of the OSDBU director:
2010 (Total respondents: 25): 24;
2003 (Total respondents: 24): 22;
No, this function is not a duty of the OSDBU director:
2010 (Total respondents: 25): 1[C];
2003 (Total respondents: 24): 2.
Section 15(k) function: Facilitating small business participation as
subcontractors to bundled contracts;
Yes, this function is a duty of the OSDBU director:
2010 (Total respondents: 25): 20;
2003 (Total respondents: 24): 19;
No, this function is not a duty of the OSDBU director:
2010 (Total respondents: 25): 5[D];
2003 (Total respondents: 24): 4;
No answer:
2010 (Total respondents: 25): 0;
2003 (Total respondents: 24): 1.
Section 15(k) function: Assisting small businesses to obtain payments
from your agency;
Yes, this function is a duty of the OSDBU director:
2010 (Total respondents: 25): 19;
2003 (Total respondents: 24): 20;
No, this function is not a duty of the OSDBU director:
2010 (Total respondents: 25): 6[E];
2003 (Total respondents: 24): 4.
Section 15(k) function: Determining/Reviewing individual acquisitions
for small business set-asides;
Yes, this function is a duty of the OSDBU director:
2010 (Total respondents: 25): 18;
2003 (Total respondents: 24): 17;
No, this function is not a duty of the OSDBU director:
2010 (Total respondents: 25): 7[F];
2003 (Total respondents: 24): 7.
Section 15(k) function: Assisting small businesses to obtain payments
from prime contractors;
Yes, this function is a duty of the OSDBU director:
2010 (Total respondents: 25): 14;
2003 (Total respondents: 24): 17;
No, this function is not a duty of the OSDBU director:
2010 (Total respondents: 25): 11[G];
2003 (Total respondents: 24): 7.
Section 15(k) function: Assigning a small business technical advisor;
Yes, this function is a duty of the OSDBU director:
2010 (Total respondents: 25): 10;
2003 (Total respondents: 24): 13;
No, this function is not a duty of the OSDBU director:
2010 (Total respondents: 25): 10[H];
2003 (Total respondents: 24): 7;
No answer:
2010 (Total respondents: 25): 5[I];
2003 (Total respondents: 24): 4.
Source: GAO analysis of survey data from 2010 and 2003.
[A] The one agency that reported that supervisory authority over
personnel with the duties and functions of the OSDBU was not a
function of the OSDBU was SSA.
[B] The one agency that reported that attempting to identify
solicitations involving bundling of contract requirements was not a
function of the OSDBU was the Office of Personnel Management (OPM).
[C] The one agency that reported that working with agency acquisition
officials to revise procurement strategies for bundled contract
requirements to increase small business participation was not a
function of the OSDBU was SSA.
[D] The five agencies that reported that facilitating small business
participation as subcontractors to bundled contracts was not a
function of their offices were the Departments of Agriculture and
Commerce, the Office of the Secretary of Defense, OPM, and SSA.
[E] The six agencies that reported that assisting small businesses to
obtain payments from their agencies was not a function of their
offices were the Departments of the Air Force, Education, and the
Interior; EPA; the Office of the Secretary of Defense; and SSA.
[F] The seven agencies that reported that determining/reviewing
individual acquisitions for small business set-asides was not a
function of their offices were the Departments of the Army, Education,
Energy, Housing and Urban Development (HUD), and Transportation; the
Office of the Secretary of Defense; and OPM.
[G] The 11 agencies that reported that assisting small businesses to
obtain payments from prime contractors was not a function of their
offices were the Departments of Agriculture, the Air Force, Education,
the Interior, and Transportation; EPA; HUD; the Office of the
Secretary of Defense; OPM; SSA; and the U.S. Agency for International
Development (USAID).
[H] The 10 agencies that reported that assigning a small business
technical advisor was not a function of their offices were the
Departments of the Air Force, the Army, Commerce, Energy, the
Interior, Justice, the Navy, Transportation, and Veterans Affairs and
DLA.
[I] Section 15(k) of the Small Business Act requires the OSDBU
director to designate a small business technical advisor when SBA has
assigned a procurement center representative to their agency.
According to the OSDBU directors at HUD, the Office of the Secretary
of Defense, OPM, SSA, and USAID, SBA had not assigned a procurement
center representative to their agencies at the time of our survey. As
a result, the OSDBU directors of these agencies were not required to
assign a small business technical advisor.
[End of figure]
OSDBU Directors Varied in How Extensively They Carried Out Certain
Section 15(k) Functions:
We also asked OSDBU directors about the extent to which they carried
out six of the eight 15(k) functions, and their responses varied.
[Footnote 20] Over half of those OSDBU directors who responded to the
contract bundling questions reported that they carried out these
functions to either a great or very great extent (see table 2). In
contrast, six OSDBU directors reported having assisted small
businesses to obtain payments from their agencies to a great or very
great extent. Even fewer (two) reported having assisted small
businesses to obtain payments from prime contractors to a great or
very great extent.
Table 2: Extent to Which 25 OSDBU Directors Surveyed Performed 15(k)
Contract Bundling and Payment Assistance Functions:
Section 15(k) function: Attempting to identify proposed solicitations
that involve bundling of contract requirements;
Not a role of the OSDBU: 1;
Very great extent: 9;
Great extent: 7;
Moderate extent: 2;
Some extent: 5;
Little or no extent: 1.
Section 15(k) function: Working with agency acquisition officials to
revise procurement strategies for bundled contract requirements;
Not a role of the OSDBU: 1;
Very great extent: 9;
Great extent: 5;
Moderate extent: 2;
Some extent: 4;
Little or no extent: 4.
Section 15(k) function: Facilitating small business participation as
subcontractors to bundled contracts;
Not a role of the OSDBU: 5;
Very great extent: 7;
Great extent: 6;
Moderate extent: 2;
Some extent: 1;
Little or no extent: 4.
Section 15(k) function: Assisting small businesses to obtain payments
from agency;
Not a role of the OSDBU: 6;
Very great extent: 3;
Great extent: 3;
Moderate extent: 4;
Some extent: 5;
Little or no extent: 4.
Section 15(k) function: Assisting small businesses to obtain payments
from prime contractors;
Not a role of the OSDBU: 11;
Very great extent: 1;
Great extent: 1;
Moderate extent: 2;
Some extent: 5;
Little or no extent: 5.
Source: GAO analysis of 2010 survey data.
[End of table]
Of the 18 OSDBU directors who reported that reviewing or determining
individual contracts that should be set aside for a small business was
a function of their OSDBU, 13 stated they reviewed proposed small
business set-asides for individual acquisitions in all or most cases.
In their written comments, nine directors noted that they reviewed all
acquisitions exceeding a certain amount for small business set-aside
determinations. For instance, one of these directors explained that
the agency had a regulation that prescribed policies,
responsibilities, and procedures for clearing contracts over the
simplified acquisition threshold ($150,000) that were not set aside or
reserved for small business participation, including bundled contracts.
We also asked the OSDBU directors to indicate the extent to which they
cooperated and consulted with SBA in carrying out their
responsibilities. Twenty-one directors reported that they cooperated
and consulted with SBA to a great or very great extent. In their
written comments, more than half of the directors noted they
participated in SBA-sponsored activities and initiatives. For
instance, 13 reported attending or sending staff to monthly SBA Small
Business Procurement Advisory Council meetings.[Footnote 21]
OSDBU Directors Reported That Agency Personnel Other Than the OSDBU
Staff Often Carried Out Certain 15(k) Functions:
The number of OSDBU directors surveyed who did not view a section
15(k) function as their current responsibility varied, depending on
the specific function. The number ranged from 1 who did not view
maintaining supervisory authority over OSDBU personnel as a function
to 11 who did not view assisting small businesses to obtain payments
from prime contractors as a responsibility. In their written comments
and follow-up interviews, the directors who did not view a section
15(k) function as their responsibility generally stated that
contracting, acquisition, or program staff performed it. It was not
clear from our survey results the extent to which OSDBU directors are
involved in those functions carried out by other agency staff.
Appendix III provides details on the agency personnel other than OSDBU
staff who carry out certain section 15(k) functions.
Few Directors Performed Procurement-related Roles Outside of Their
15(k) Functions:
In 2010, a smaller number of OSDBU directors than in 2003 viewed
additional procurement activities such as developing solicitations,
evaluating proposals, developing factors for evaluating solicitations,
and monitoring small businesses as roles of the OSDBU (see figure 2).
For example, 3 directors reported that developing proposed
solicitations was a role of the OSDBU in 2010, compared with 9
directors in 2003. The majority of the 22 directors who reported they
did not carry out this function commented that their agencies'
contracting offices performed this role. Of these 22 directors, 6
reported that the OSDBU played a collaborative role, such as reviewing
solicitation language. Additionally, in 2010, 11 directors viewed
developing evaluation factors for solicitations at their agencies as a
role of the OSDBU, compared with 15 in 2003. However, of the 14
directors who said they did not perform the function in 2010, 4
reported having some involvement in the process. For example, 1
director commented that the OSDBU had provided examples of
solicitation evaluation criteria for agency procurements.
Figure 2: Figure 2: OSDBU Directors Reporting That Duties Other Than
15(K) Requirements Were Functions of Their Offices:
[Refer to PDF for image: horizontal bar graph]
Function: Developing proposed solicitations;
Yes, this function is a duty of the OSDBU director:
2010 (Total respondents: 25): 3;
2003 (Total respondents: 24): 9;
No, this function is not a duty of the OSDBU director:
2010 (Total respondents: 25): 22;
2003 (Total respondents: 24): 15.
Function: Evaluating proposals submitted by potential contractors in
response to solicitations;
Yes, this function is a duty of the OSDBU director:
2010 (Total respondents: 25): 5;
2003 (Total respondents: 24): 7;
No, this function is not a duty of the OSDBU director:
2010 (Total respondents: 25): 20;
2003 (Total respondents: 24): 16.
Function: Developing evaluation factors for solicitations for the
agency;
Yes, this function is a duty of the OSDBU director:
2010 (Total respondents: 25): 11;
2003 (Total respondents: 24): 15;
No, this function is not a duty of the OSDBU director:
2010 (Total respondents: 25): 14;
2003 (Total respondents: 24): 9.
Function: Monitoring small businesses that receive prime contracts;
Yes, this function is a duty of the OSDBU director:
2010 (Total respondents: 25): 10;
2003 (Total respondents: 24): 12;
No, this function is not a duty of the OSDBU director:
2010 (Total respondents: 25): 15;
2003 (Total respondents: 24): 12.
Source: GAO analysis of survey data from 2010 and 2003.
[End of figure]
OSDBUs Collaborated to Promote Small Business Contracting, but Some
Directors Reported Staffing and Funding Challenges:
OSDBU directors reported they collaborated with acquisition officials
and conducted outreach to small businesses to promote small business
contracting. For example, nearly all of the 25 OSDBU directors we
surveyed indicated they were involved in acquisition planning. At the
seven agencies with major contracting activity, OSDBU officials told
us that top agency leaders also participated in outreach events and
issued agency policy statements supporting small business efforts.
Agencies were held accountable for fostering small business
contracting through SBA's small business goals, and SBA had initiated
efforts to identify promising practices OSDBUs can take to further
small business contracting. Some OSDBU directors we surveyed reported
that inadequate staffing levels and limited budgetary resources were
challenges to carrying out their responsibilities.
OSDBU Directors Used Collaboration, Outreach, and Oversight to
Facilitate Small Business Contracting:
OSDBU directors use a variety of methods--including internal and
external collaboration, outreach to small businesses, and oversight of
agency small business contracting--to facilitate small business
contracting.
Internal and External Collaboration:
The OSDBU directors we surveyed and spoke with said that both internal
and external collaboration were important to their efforts to promote
small business contracting. Twenty-three of the 25 OSDBU directors
surveyed viewed involvement in acquisition planning as a role or
function of their OSDBUs. Of this number, 15 directors reported they
carried out this function to a great or very great extent. For
instance, OSDBU directors reported acquisition planning activities
such as preparing annual forecasts of contracting opportunities, being
a voting member of the agency's senior procurement council,
participating in contracting agreement and review board meetings, and
reviewing and providing feedback on draft acquisition plans.
Further, the OSDBU directors we interviewed at the seven agencies with
major contracting activity all viewed relationships with acquisition
staff as important in promoting small business contracting. For
example, the OSDBU director at DLA told us that establishing
relationships with acquisition management was the most important part
of promoting small business contracting. In addition, the OSDBU
director at HHS described small business contracting as a "three-
legged stool," with acquisition staff, program staff, and OSDBU staff
working together to support it. Four of the seven OSDBU directors
stressed the importance of working with acquisition officials from the
start of a project rather than trying to integrate them after a
project was under way. For instance, the director at HHS stated that
the OSDBU spent a great deal of time on early acquisition planning to
help ensure that small businesses received consideration throughout
the decision-making process. Officials at the Air Force OSDBU also
stated that early involvement gave the office time to review
acquisitions and discuss small business involvement. These officials
noted that reviewing proposed actions late in the process placed the
OSDBU in a defensive position.
Six of the seven directors we interviewed also told us they
participated in acquisition teams as advocates for small business. For
instance, Energy has established a monthly Advanced Planning
Acquisition Team comprising OSDBU, procurement, acquisition, and SBA
officials. The purpose of the team is to review proposed strategies
for new and existing acquisitions to identify prime and subcontracting
opportunities for small businesses. The OSDBU directors at both Army
and DLA are members of acquisition review boards for contracts of more
than $500 million and $20 million, respectively. The seven OSDBU
directors we interviewed also stated that small business staff in the
field, often referred to as small business specialists, reviewed
proposed acquisitions for opportunities. For example, the Army OSDBU
director told us that the OSDBU reviewed all acquisitions of more than
$500 million but that these specialists reviewed all acquisitions over
$150,000 that were not set-aside for small businesses and worked with
acquisition staff to ensure that small businesses were considered.
In addition, the OSDBU directors we interviewed collaborated with
other federal agencies to maximize small business contracting. All
seven participate in the Federal OSDBU Directors Interagency Council,
an informal organization that meets to exchange information on
initiatives and processes related to small businesses and outreach
events that promote small business contracting.[Footnote 22] Among
other things, the council seeks to identify best practices and share
ideas and experiences among federal agencies and private industry to
help leverage resources and develop solutions for promoting small
business involvement.
Outreach Efforts to Small Businesses:
Nearly all of the OSDBU directors we surveyed saw outreach activities
to small businesses as a function of their offices. For instance, 23
of the 25 OSDBU directors viewed hosting conferences for small
businesses as one of their responsibilities, and 23 had hosted such an
event in the last 2 years. More specifically, these 23 agencies had
hosted an average of 20 conferences in the past 24 months. For
instance, one OSDBU director reported the agency had sponsored
conferences of varying sizes to address contractual requirements that
program offices noticed or forecasted. The same director noted the
conferences were typically conducted in a networking or "business
fair" format, allowing vendors to engage program and contracting
officials. In addition, most of the OSDBU directors surveyed (20 of
25) saw sponsoring training programs for small businesses as one of
their responsibilities, and 18 had hosted such an event in the last 2
years. For example, OSDBU directors described sponsoring trainings for
small businesses in specific socioeconomic groups, providing one-on-
one trainings, and offering workshops focused on specific skills such
as writing proposals and teaming with larger businesses.
The seven OSDBU directors we interviewed provided examples of outreach
to the small business community. For example, the OSDBU director at
DLA said the OSDBU worked closely with the American Legion to promote
contracting to small businesses owned by service-disabled veterans.
According to the NASA OSDBU director, small business staff held over
100 outreach events in fiscal year 2010. Other OSDBU officials
described their efforts to disseminate information to small businesses
through Web sites. For instance, Navy's OSDBU director stated the
agency was working to standardize the Web site formats used by its
various units for outreach to small businesses. He explained that
OSDBU staff had reviewed the Web sites to determine whether a small
business could access information easily, and found retrieving
information on small businesses difficult because each of the sites
was set up differently. The Air Force maintains a small business Web
site that provides small businesses with information on the agency's
contracting opportunities.[Footnote 23] An OSDBU official stated the
site was comprehensive and included the contact information for small
business staff, long-range acquisition data, information on various
outreach efforts, links to the Air Force's quarterly newsletter, and
articles on small business issues.
Oversight of Agency Small Business Contracting:
OSDBUs also provide oversight of agencies' small business contracting.
The FAR requires annual assessments of the extent to which small
businesses are receiving a fair share of federal
procurements.[Footnote 24] We found that these assessments varied
across the seven agencies we interviewed. For example, the OSDBU at
Energy conducts quarterly reviews of program offices. Offices are
rated using a color-coded system--green for reaching 95 percent of
small business goals and yellow or red for lower percentages. The NASA
OSDBU produces monthly reports on the agency's individual space and
research centers' progress in meeting small business goals and
collects data on the centers' outreach and training efforts.[Footnote
25] The OSDBU follows up with individual centers that do not meet
their goals. At Army, the OSDBU director tracks agency performance
using Federal Procurement Data System--Next Generation data. She noted
that if the data indicated decreases in small business contracting
from prior-year trends, agency leadership would be informed.
All seven agencies we interviewed also conducted program management
reviews (PMR) or similar reviews to help ensure that small businesses
were being considered for contracts and internal controls for ongoing
contracts followed. During PMRs, officials review a sample of existing
contracts to determine whether proper procedures and internal
controls, including those related to small business, have been
followed. The OSDBU directors at four agencies (Army, DLA, HHS, and
NASA) reported that OSDBU and acquisition officials jointly conducted
these reviews. At the Air Force, small business staff in field offices
conducted the PMRs, and at Energy, procurement staff conducted them.
The Navy OSDBU had replaced PMRs with procurement performance
management assessments, which review contracting offices and commands
on 11 categories, including involvement of small business in
acquisition planning and procurement planning, marketing strategies
and approaches, number of set-asides, and inclusion of small business
clauses in all contracts.
Top Agency Officials Generally Provided Support for Small Business
Efforts:
OSDBU officials at the seven agencies we contacted told us that top
agency leaders supported small business contracting by participating
in outreach events and issuing policy statements. For instance, these
OSDBU directors cited the following examples of their agency heads'
participation in outreach events:
* The DLA Director took part in public forums such as conferences and
emphasized small business contracting when interviewed for a magazine
article.
* The NASA Administrator attended the agency's second annual small
business symposium and award ceremony to personally recognize the
achievements of small businesses, while the Deputy Administrator
handed out awards.
* In fiscal year 2010, top Army management attended five major
outreach events, including the National Veterans Conference, an event
that the OSDBU had hosted for 6 years.
Top management also promoted small business contracting by issuing
agency policy statements or memos. For instance:
* The Secretary of the Air Force issued a joint memo with the Chief of
Staff in January 2009 that encouraged officials to "aggressively seek"
small businesses owned by service-disabled veterans for Air Force
contracts and encouraged using the OSDBU to help identify strategies
and capable firms.
* The Secretary of Energy issued a memo in November 2009 asking all
program offices to work with the OSDBU to promote prime contracting,
subcontracting, and financial assistance opportunities for small
businesses, including small disadvantaged, Historically Underutilized
Business Zone (HUBZone), 8(a), women-owned, and service-disabled
veteran-owned small businesses.
* In June 2009, the Secretary of the Navy issued a memo establishing
the Department of the Navy Small Business Award to recognize
individuals and teams who have made outstanding contributions in
promoting competition and innovation in the Navy acquisition process.
* The Deputy Secretary at HHS issued a memo in January 2009, which
stated that component heads were expected to provide their full
support to the small business program at every juncture within the
acquisition process.
SBA's Small Business Goals and Performance Standards Held Agencies and
Staff Accountable for Furthering Small Business Contracting:
Agencies as a whole are held accountable for furthering small business
contracting through SBA's small business goaling program and
scorecard. SBA produces an annual "goaling" report showing the
percentage of contracting dollars awarded to small businesses. SBA's
goaling report for fiscal year 2009 shows that 22 percent of eligible
contract dollars governmentwide were awarded to small businesses, an
amount that was just short of the statutory requirement of 23 percent.
As shown in table 3, the percentage awarded to small businesses by the
agencies we surveyed ranged from 6 percent to 56 percent of eligible
contract dollars.[Footnote 26]
Table 3: Small Business Contracting at Agencies Surveyed by GAO,
Fiscal Year 2009:
Agency surveyed: Agriculture;
Total small business eligible dollars[B] (millions): $5,321;
Small business dollars (millions): $2,803;
Small business goal[C]: 49.9%;
Percentage of eligible dollars awarded to small businesses: 52.7%.
Agency surveyed: Commerce;
Total small business eligible dollars[B] (millions): $3,341;
Small business dollars (millions): $1,222;
Small business goal[C]: 46.7%;
Percentage of eligible dollars awarded to small businesses: 36.6%.
Agency surveyed: DOD[A];
Total small business eligible dollars[B] (millions): $302,377;
Small business dollars (millions): $63,894;
Small business goal[C]: 22.2%;
Percentage of eligible dollars awarded to small businesses: 21.1%.
Agency surveyed: Education;
Total small business eligible dollars[B] (millions): $1,485;
Small business dollars (millions): $244;
Small business goal[C]: 12.8%;
Percentage of eligible dollars awarded to small businesses: 16.4%.
Agency surveyed: Energy;
Total small business eligible dollars[B] (millions): $30,991;
Small business dollars (millions): $1,959;
Small business goal[C]: 5.9%;
Percentage of eligible dollars awarded to small businesses: 6.3%.
Agency surveyed: EPA;
Total small business eligible dollars[B] (millions): $2,007;
Small business dollars (millions): $950;
Small business goal[C]: 39.8%;
Percentage of eligible dollars awarded to small businesses: 47.3%.
Agency surveyed: General Services Administration;
Total small business eligible dollars[B] (millions): $7,399;
Small business dollars (millions): $2,001;
Small business goal[C]: 35.7%;
Percentage of eligible dollars awarded to small businesses: 27.0%.
Agency surveyed: HHS;
Total small business eligible dollars[B] (millions): $18,797;
Small business dollars (millions): $3,204;
Small business goal[C]: 19.0%;
Percentage of eligible dollars awarded to small businesses: 17.0%.
Agency surveyed: Homeland Security;
Total small business eligible dollars[B] (millions): $14,440;
Small business dollars (millions): $4,676;
Small business goal[C]: 31.9%;
Percentage of eligible dollars awarded to small businesses: 32.4%.
Agency surveyed: Housing and Urban Development;
Total small business eligible dollars[B] (millions): $874;
Small business dollars (millions): $434;
Small business goal[C]: 66.3%;
Percentage of eligible dollars awarded to small businesses: 49.7%.
Agency surveyed: Interior;
Total small business eligible dollars[B] (millions): $2,924;
Small business dollars (millions): $1,644;
Small business goal[C]: 55.5%;
Percentage of eligible dollars awarded to small businesses: 56.2%.
Agency surveyed: Justice;
Total small business eligible dollars[B] (millions): $7,674;
Small business dollars (millions): $1,883;
Small business goal[C]: 36.8%;
Percentage of eligible dollars awarded to small businesses: 24.5%.
Agency surveyed: Labor;
Total small business eligible dollars[B] (millions): $1,956;
Small business dollars (millions): $718;
Small business goal[C]: 33.4%;
Percentage of eligible dollars awarded to small businesses: 36.7%.
Agency surveyed: NASA;
Total small business eligible dollars[B] (millions): $14,640;
Small business dollars (millions): $2,208;
Small business goal[C]: 15.4%;
Percentage of eligible dollars awarded to small businesses: 15.1%.
Agency surveyed: Office of Personnel Management;
Total small business eligible dollars[B] (millions): $1,605;
Small business dollars (millions): $224;
Small business goal[C]: 28.9%;
Percentage of eligible dollars awarded to small businesses: 14.0%.
Agency surveyed: SSA;
Total small business eligible dollars[B] (millions): $1,241;
Small business dollars (millions): $403;
Small business goal[C]: 32.5%;
Percentage of eligible dollars awarded to small businesses: 32.5%.
Agency surveyed: State;
Total small business eligible dollars[B] (millions): $3,003;
Small business dollars (millions): $1,019;
Small business goal[C]: 37.0%;
Percentage of eligible dollars awarded to small businesses: 33.9%.
Agency surveyed: Transportation;
Total small business eligible dollars[B] (millions): $1,929;
Small business dollars (millions): $751;
Small business goal[C]: 37.0%;
Percentage of eligible dollars awarded to small businesses: 38.9%.
Agency surveyed: Treasury;
Total small business eligible dollars[B] (millions): $2,157;
Small business dollars (millions): $576;
Small business goal[C]: 29.4%;
Percentage of eligible dollars awarded to small businesses: 26.7%.
Agency surveyed: U.S. Agency for International Development;
Total small business eligible dollars[B] (millions): $1,059;
Small business dollars (millions): $109;
Small business goal[C]: 19.6%;
Percentage of eligible dollars awarded to small businesses: 8.7%.
Agency surveyed: Veterans Affairs;
Total small business eligible dollars[B] (millions): $14,545;
Small business dollars (millions): $5,082;
Small business goal[C]: 28.7%;
Percentage of eligible dollars awarded to small businesses: 34.9%.
Source: SBA's 2009 Goaling Report and Scorecards.
[A] DOD and its component agencies (Air Force, Army, DLA, and Navy)
are assessed as one unit by the SBA goaling program.
[B] Small business eligible dollars are the total dollars obligated
for contracts minus certain exclusions such as contracts performed
outside the U.S., foreign military sales, and leases.
[C] The small business goal that SBA sets for each agency varies and
is the percentage of total small business eligible dollars to be
awarded to small businesses.
[End of table]
SBA sets annual goals for small business contracting at each agency,
basing these goals on the agencies' past performance, total spending,
and purchases of goods and services from small businesses. These goals
are set for the agency as a whole, not just for the OSDBU. As we
reported in 2009, OSDBU officials at some agencies reported challenges
with the goal-setting process, including limitations in negotiating
and appealing their goals.[Footnote 27] At that time, agencies told
GAO the goal-setting process was not a negotiation and that SBA did
not factor in changes to agencies' contracting priorities in setting
the goals. Two of the seven agencies that we interviewed (Energy and
HHS) said that meeting small business goals was difficult because the
goods and services the agency purchased were not well suited for small
business contracts. For example, 85 percent of Energy's contracts are
facility management contracts that have traditionally been awarded to
large businesses and universities to manage operations at sites such
as Los Alamos National Laboratory. According to SBA officials, the
agency has revised the goal-setting process to make it more
collaborative.
SBA also assessed all of the agencies we surveyed using its annual
small business scorecard to ensure greater accountability. According
to SBA, the scorecard fulfills its statutory requirement to report to
the President and Congress on achievements by federal agencies against
their annual goals.[Footnote 28] The SBA scorecard evaluates factors
such as goals met, progress shown, agency small business strategies,
and top-level commitment to meeting goals for 24 agencies and offices
and the government as a whole. In fiscal year 2009, SBA updated the
scorecard and now assigns a letter grade to each agency. Eighty
percent of an agency's grade is based on its progress in meeting its
prime contracting goal, 10 percent on its progress in meeting its
subcontracting goal, and 10 percent on a performance rating assigned
to the agency by a panel of OSDBU directors. The agencies submit
reports on small business achievements that the panel uses to
determine performance ratings.[Footnote 29] The scorecard does not
specifically consider the performance of the OSDBU or its director,
although the OSDBU director may be involved in some of the activities
evaluated.
All seven of the OSDBU directors we interviewed are held accountable
for promoting small business contracting primarily through internal
performance standards and appraisals. Performance standards identify
goals and set objectives that are used as key indicators of
achievement during annual or midpoint performance appraisals. For
example, the NASA OSDBU director explained that, as part of his
performance appraisal process, he was reviewed against measurable and
achievable goals. These included developing a small business
improvement plan for the agency with specific initiatives to meet its
small business goals and implementing a training course for agency
staff on a standard method to evaluate proposals submitted to the
agency.
To help OSDBUs improve their capabilities, SBA and others have
initiated efforts to identify promising practices that OSDBUs can use
to facilitate small business contracting. A White House Interagency
Task Force on Federal Contracting Opportunities for Small Businesses,
which was established April 2010, identified the need for best
practices. The task force issued a report that identified challenges
to small businesses such as inadequate training for agency staff.
[Footnote 30] Among other things, it recommended that the executive
branch facilitate the identification and rapid adoption of successful
practices for increasing opportunities for small businesses. To
implement this recommendation, the task force suggested that SBA (1)
develop a Web site to share best practices and (2) organize an event
for OSDBUs to present best practices for ensuring greater small
business participation and catalog and publicize the results.
According to SBA officials, they have taken steps to plan these
efforts. SBA had already begun to highlight on its Web site best
practices for making opportunities available to small businesses and
has identified three to date.[Footnote 31] In addition, during the
scorecard process, the panel of OSDBU directors identified best
practices at 12 agencies, although these have not been published with
this list on SBA's Web site. The Federal OSDBU Directors Interagency
Council also seeks to identify best practices and has identified some
that focus on interactions between OSDBUs and small businesses.
[Footnote 32]
Survey Respondents Identified Staffing, Funding, and Influence in the
Procurement Process as Challenges:
Most of the 25 OSDBU directors surveyed indicated that inadequate
staffing levels and limited budgetary resources were challenges to
carrying out their responsibilities to at least some extent (see table
4). These issues were also reported as challenges in 2003. Twenty
agencies reported that inadequate staffing levels were a challenge to
at least some extent in 2010, compared with 17 agencies in 2003.
Seventeen agencies reported that limited budgetary resources were a
challenge to at least some extent in 2010 and in 2003.
Table 4: Challenges Reported by OSDBU Directors in Carrying Out Their
Responsibilities:
Inadequate staffing levels:
Year of survey: 2010;
Very great extent: 4;
Great extent: 2;
Moderate extent: 8;
Some extent: 6;
Little or no extent: 5;
No answer: 0.
Inadequate staffing levels:
Year of survey: 2003;
Very great extent: 1;
Great extent: 4;
Moderate extent: 5;
Some extent: 7;
Little or no extent: 6;
No answer: 1.
Limited budgetary resources:
Year of survey: 2010;
Very great extent: 6;
Great extent: 1;
Moderate extent: 5;
Some extent: 5;
Little or no extent: 8;
No answer: 0.
Limited budgetary resources:
Year of survey: 2003;
Very great extent: 2;
Great extent: 3;
Moderate extent: 3;
Some extent: 9;
Little or no extent: 6;
No answer: 1.
Lack of influence in the procurement process:
Year of survey: 2010;
Very great extent: 1;
Great extent: 2;
Moderate extent: 3;
Some extent: 6;
Little or no extent: 13;
No answer: 0.
Lack of influence in the procurement process:
Year of survey: 2003;
Very great extent: 2;
Great extent: 2;
Moderate extent: 3;
Some extent: 6;
Little or no extent: 10;
No answer: 1.
Source: GAO analysis of survey data from 2010 and 2003.
[End of table]
Six agencies reported that inadequate staffing levels were a challenge
to a great or very great extent, and seven agencies reported that
limited budgetary resources were a challenge to a great or very great
extent. In a follow-up interview, OSDBU officials at one agency
explained that while they were able to perform their mission,
inadequate staffing levels had resulted in increased staff workloads,
longer work days, and the need to cross-train staff. They noted that
in addition to the functions listed in 15(k) of the Small Business
Act, they were also responsible for reviewing grant programs for small
business opportunities. The OSDBU director at another agency indicated
that because she had only one staff person, her office was unable to
review the majority of procurement actions, including those involving
contract bundling. She also noted that limited budgetary resources
restricted the hiring of additional staff. Additionally, in follow-up
interviews, four OSDBU directors noted that limited budgetary
resources hindered their efforts to reach out to small businesses.
Almost half of the OSDBU directors surveyed also reported that their
lack of influence in the procurement process was a challenge to
carrying out their responsibilities to at least some extent. Three
agencies indicated that this issue represented a challenge to a great
or very great extent. In a follow-up interview, OSDBU officials at one
agency told us that better coordination was needed between the OSDBU
and acquisition officials on issues related to small businesses. While
the OSDBU participated in acquisition planning, the officials noted
that their role in acquisition decisions was not clear. Another OSDBU
director stated that as part of the acquisition approval process, he
could disagree with a contract recommendation. However, the director
noted that his decision could also be appealed and overruled by an
acquisition executive, thus limiting the OSDBU's influence.
At the seven agencies with major contracting activity, trends in
staffing and funding levels varied over the past 5 years. From fiscal
year 2006 to 2010, OSDBU staffing generally decreased at Energy,
increased slightly at DLA, the Navy, and NASA, and stayed the same at
the Army and HHS (see table 5). At the Air Force, staffing fluctuated
in the interim, but was the same in fiscal year 2010 as it was in
fiscal year 2006.
Table 5: OSDBU Full-Time Equivalent Staff, Fiscal Years 2006 to 2010:
Agency: Air Force;
FY 2006: 13;
FY 2007: 12;
FY 2008: 17;
FY 2009: 18;
FY 2010: 13.
Agency: Army;
FY 2006: 9;
FY 2007: 9;
FY 2008: 9;
FY 2009: 9;
FY 2010: 9.
Agency: DLA;
FY 2006: 7.5;
FY 2007: 7.5;
FY 2008: 8;
FY 2009: 8;
FY 2010: 10.
Agency: Energy;
FY 2006: 9;
FY 2007: 9;
FY 2008: 9;
FY 2009: 6;
FY 2010: 6.
Agency: HHS;
FY 2006: 17;
FY 2007: 17;
FY 2008: 17;
FY 2009: 17;
FY 2010: 17.
Agency: NASA;
FY 2006: 4;
FY 2007: 5.6;
FY 2008: 4.83;
FY 2009: 5.38;
FY 2010: 5.14.
Agency: Navy;
FY 2006: 5;
FY 2007: 6;
FY 2008: 6;
FY 2009: 6;
FY 2010: 7.
Source: Agency documents and officials.
Note: The partial numbers for NASA are due to changes in the number of
staff throughout the year.
[End of table]
Additionally, from fiscal year 2006 to 2010 OSDBU funding generally
decreased at the Air Force, the Army, and Energy and increased at DLA,
HHS, the Navy, and NASA (see table 6).
Table 6: OSDBU Budgets, Fiscal Years 2006 to 2010:
Agency: Air Force;
FY 2006: $2,525,000;
FY 2007: $1,931,000;
FY 2008: $2,791,000;
FY 2009: $3,947,000;
FY 2010: $1,462,000.
Agency: Army;
FY 2006: $2,156,000;
FY 2007: $2,119,000;
FY 2008: $2,081,000;
FY 2009: $2,111,000;
FY 2010: $1,868,000.
Agency: DLA;
FY 2006: $876,997;
FY 2007: $848,414;
FY 2008: $899,855;
FY 2009: $1,096,264;
FY 2010: $1,157,593.
Agency: Energy;
FY 2006: $1,333,866;
FY 2007: $1,192,886;
FY 2008: $1,059,928;
FY 2009: $964,454;
FY 2010: $789,828.
Agency: HHS;
FY 2006: $2,644,000;
FY 2007: $2,628,000;
FY 2008: $2,660,000;
FY 2009: $2,690,000;
FY 2010: $2,690,000.
Agency: NASA;
FY 2006: $1,168,196;
FY 2007: $1,527,274;
FY 2008: $1,548,217;
FY 2009: $1,796,166;
FY 2010: $1,838,817.
Agency: Navy;
FY 2006: $519,000;
FY 2007: $665,000;
FY 2008: $898,000;
FY 2009: $971,000;
FY 2010: $1,619,000.
Source: Agency documents and officials.
Note: The purpose of this table is to show trends at each agency over
the past 5 years, not to compare OSDBU budgets across agencies. In
general, the budget data include funding for general office operations
and personnel. For Air Force and Army, these data are their
maintenance and operations budgets, which include only civilian
salaries.
[End of table]
The OSDBU directors at the seven agencies we interviewed noted a
relationship between changes in staffing and funding levels. For
example, recent decreases in the Air Force and Energy ODSBU budgets
were due to decreases in staffing. Air Force officials told us that
the OSDBU had streamlined operations by eliminating some redundant
contractor positions and converting some contractors into civilian
positions. They noted that these changes had resulted in greater
efficiencies and increased quality. Energy officials stated that since
the change in administrations in 2008, three political appointees
working at the Energy ODSBU had left, halving the number of staff
responsible for the same workload. However, they noted that hiring
interns and contractors had mitigated staffing constraints and the
agency anticipated hiring additional OSDBU staff in the future. Recent
increases in the ODSBU funding for Navy and DLA had resulted in
increases in staffing. The Navy ODSBU director explained that in
addition to funding training and outreach programs, the recent
increases in funding were used to create an OSDBU industry analyst
position, and two additional positions were being developed. The DLA
OSDBU director noted that recent budget increases provided for an
increase in staffing but funding for other expenses such as travel had
not increased, causing her to have to turn down speaking and outreach
events due to lack of funds.
Six of the seven OSDBU directors we interviewed told us they would
increase the breadth of the activities they currently performed if
more resources were available.[Footnote 33] For example, the OSDBU
directors at the Army and Air Force stated they would increase their
outreach activities. Additionally, a few OSDBU directors noted that if
more resources were available, they would perform additional analysis
and offer more training. For example, the DLA OSDBU director stated
she would analyze DLA commodity purchases and research trends, assist
with more market research, provide more training to small business and
other staff, and fill skill gaps within the office. With additional
resources, the HHS OSDBU director stated she would increase internal
training opportunities for acquisition program staff and provide
online training for small businesses.
Conclusions:
Section 15(k)(3) of the Small Business Act seeks to help ensure that
small business advocates within federal agencies have direct access to
the highest levels of the agency. However, 7 of the 16 federal
agencies that we reviewed were not in compliance with the act.
Moreover, all of the agencies that are currently not in compliance
were not in compliance in 2003 and have maintained the same or a
similar reporting structure, even though at the time we recommended
changing them. The OSDBU directors at the nine agencies that were in
compliance with section 15(k)(3) cited positive benefits to the
reporting relationship, while the OSDBU directors at the seven
noncompliant agencies differed on the importance of reporting to the
agency head or deputy head. Two thought that not reporting to the
agency head or deputy head was a problem, while the other five
asserted that the lack of a direct reporting relationship with the
agency head had not adversely affected their efforts to advocate for
small business contracting. However, we did not find that these
arguments justified noncompliance with section 15(k)(3). Continued
noncompliance with the requirement undermines the intent of the
provision. If the agencies believe their reporting structures are
sufficient to ensure that small business contracting receives
attention from top management at federal agencies, at a minimum they
have the obligation to explain their noncompliance to Congress and
provide support for their views, including requesting any statutory
flexibilities to permit exceptions as appropriate. One potential
mechanism for making this information available to Congress would be
through SBA's annual scorecard process. The noncompliant agencies
could include their rationale for their reporting structure in the
annual reports that they submit to SBA, and SBA could include such
information in its scorecard report to Congress.
Recommendation for Executive Action:
Given the ongoing requirement in the Small Business Act that OSDBU
directors report to agency heads or deputy heads, we recommend that
the heads of the Departments of Agriculture, Commerce, the Interior,
Justice, State, and the Treasury and the Social Security
Administration take steps as necessary to comply with the requirement
or report to Congress on why they have not complied. Such information
could be included in SBA's annual scorecard report to Congress.
Moreover, agencies that have not complied with the requirement could
seek any statutory flexibilities or exceptions they believe may be
appropriate.
Agency Comments and Our Evaluation:
We sent a draft of this report to 26 agencies for their review and
comment. Of the nine agencies that we concluded were complying with
section 15(k)(3) of the Small Business Act, only the Department of
Education provided written comments. In those comments, the agency
noted that since our 2003 report it had taken definitive corrective
steps to achieve and remain in compliance with all applicable
requirements and stated that it was pleased with our recognition of
its changes to the reporting structure. (See appendix IV for
Education's written comments.) None of the remaining eight agencies
found to be in compliance with section 15(k)(3)--the Departments of
the Air Force, the Army, Energy, and the Navy; DLA; EPA; HHS; and
NASA--provided any comments on the draft report.[Footnote 34]
Of the seven agencies that we concluded were not complying with
section 15(k)(3), the Departments of Commerce, the Interior, Justice,
State, and the Treasury and SSA provided written comments. These
written comments are reproduced in appendixes V through X. The
Department of Agriculture did not comment on the draft report. Of the
six agencies that provided written comments, the Departments of
Commerce, Justice, State, and the Treasury disagreed with our
conclusion that their reporting relationships did not comply with
section 15(k)(3) of the Small Business Act. The Social Security
Administration agreed to revise its reporting structure, while the
Department of the Interior stated it planned to evaluate our
recommendation and options to resolve the issue. None of the agencies'
comments caused us to revise our conclusions or recommendations. The
six agencies' specific comments and our responses are summarized below.
* The Department of Commerce stated that the agency was in compliance
with section 15(k)(3) because the OSDBU director reported directly to
the Deputy Secretary on all legislative and policy issues and to the
Chief Financial Officer and Assistant Secretary for Administration on
administrative matters such as personnel and budget. The comment
letter also cited the agency's small business achievements, such as
exceeding small business goals. As noted in the draft report, the
OSDBU director stated that she reported to the Deputy Assistant
Secretary for Administration for all small business matters and to the
Assistant Secretary for Administration for administrative matters such
as budget and personnel. Agency documents, such as the organization
chart and the OSDBU director's two most recent performance appraisals,
confirmed this reporting relationship. Further, the OSDBU director
stated she had never met the Secretary or previous Deputy Secretary.
She met the new Acting Deputy Secretary in December 2010, but did not
have a reporting relationship with her. Therefore, we did not revise
our conclusion or recommendation.
* The Department of the Interior stated that it did not have comments
on the draft report, but would be evaluating our recommendation and
options to resolve the issue. The letter also indicated that the
agency would report back to GAO once it had finalized its plans.
* The Department of Justice agreed that its OSDBU was located within
the Justice Management Division. However, its comment letter stated
that this arrangement was in place for administrative purposes, and
that the OSDBU director reported directly to the Deputy Attorney
General on matters of substance. The letter stated that through this
organizational structure, the Deputy Attorney General ensured that
small businesses were provided the maximum practicable opportunity to
participate in contracting opportunities throughout the agency. The
letter also commented that the current placement of the OSDBU allowed
for the efficient management and implementation of the small business
contracting programs that were vital to the agency in satisfying its
mission. As we noted in the draft report, agency documentation such as
the OSDBU director's position description and performance appraisals
indicated that the director reported to the Deputy Assistant Attorney
General for Policy, Management and Planning. Further, the OSDBU
director told us during our review that he had never met the Deputy
Attorney General. Therefore, we did not revise our conclusion or
recommendation.
* The Department of State disagreed with the report's conclusions. The
letter pointed out that the Assistant Secretary of State for
Administration, who is the designated OSDBU director, reports to the
Deputy Secretary concerning small business activities. This
information was included in the draft report. However, we concluded
that the agency was not in compliance with section 15(k)(3) because
the Assistant Secretary had delegated his OSDBU responsibilities to a
lower-level official who did not report to the Secretary or Deputy
Secretary. Regarding this conclusion, State commented that section
15(k)(3) permitted the delegation of functions from the Assistant
Secretary to the OSDBU Operations Director and stated that while OSDBU
directors were responsible for implementing and executing the specific
functions and duties assigned under sections 8 and 15 of the Small
Business Act, section 15(k)(3) contained no requirement that the
director personally perform any specific functions. The letter further
commented that executive branch authority was typically exercised
through delegation, with an agency's basic authority being vested in
the agency head and subsequently redelegated. It cited the case of
Fleming v. Mohawk Wrecking & Lumber Co., 331 U.S. 121 (1947) as an
example in which the authority to redelegate is implied. However, as
we stated in our 2003 report, the Fleming case recognizes that the
delegation of authority may be withheld by implication, and we believe
section 15(k)(3) does exactly that.[Footnote 35] As explained in this
report, to ensure that the OSDBU responsibilities are effectively
implemented, the statute mandates that the OSDBU director (i.e., the
person carrying out the responsibilities) have immediate access and be
responsible only to the agency head or deputy. The legislative history
reveals that the reason for this requirement is that Congress believed
that agency officials responsible for promoting procurements for small
and disadvantaged businesses were often too far down the chain of
command to be effective. The reporting requirement of section 15(k)(3)
was intended to remedy this situation. The Department of State's
letter also highlighted its small and disadvantaged business goal
achievements and commented that reorganizing the OSDBU so that its
Operations Director reported directly to the Secretary or her Deputy
would decrease efficiency. The letter concluded by stating that the
OSDBU Operations Director currently had direct access whenever
necessary to decision makers in the Department programs that utilize
small and disadvantaged businesses. As indicated in the
recommendation, agencies that believe that they should have greater
flexibility should pursue this with Congress.
* The Department of the Treasury disagreed with the report's
conclusion and commented that the statute did not require that the
OSDBU director be an official assigned to small business issues full
time. The letter stated that the Assistant Secretary for Management,
in the capacity of OSDBU director, had a direct reporting relationship
to the Deputy Secretary of the Treasury and provided oversight and
direction to the Office of Small Business Programs as well as to
bureau heads and their procurement officials in executing the agency's
responsibilities under the Small Business Act. The letter noted that
the Assistant Secretary exerted considerable influence over
acquisition and budget officials at all levels in regards to attaining
small business goals. Finally, the letter commented that the OSDBU
director assigning day-to-day operations pertaining to small business
functions to subordinate officials did not establish any such other
officials as the "de facto OSDBU director." As previously discussed,
we believe that section 15(k)(3) includes an implied prohibition
against delegating the OSDBU director's authority. As a result, we did
not revise our conclusion or recommendation.
* The Social Security Administration's letter did not provide comments
on the draft report but indicated that the agency had reevaluated the
reporting relationship in light of our draft. The letter stated that
in the future the OSDBU director would be reporting to the Deputy
Commissioner, the deputy agency head for SSA.
Of the remaining 10 agencies that received a copy of the draft report,
9 agencies--the Departments of Homeland Security, Housing and Urban
Development, Labor, Transportation, and Veterans Affairs; the General
Services Administration; the Office of the Secretary of Defense; the
Office of Personnel Management; and the U.S. Agency for International
Development--did not provide any comments on the report.[Footnote 36]
The Small Business Administration provided technical comments, which
have been incorporated as appropriate.
We also provided a copy of our survey results, which will be published
in a separate product
[hyperlink, http://www.gao.gov/products/GAO-11-436SP], to the 25
agencies we surveyed and SBA for their review and comment. Only one
agency had a comment. The Department of State provided a comment via
email stating that the survey questions focused on the daily duties of
the OSDBU, but did not provide an opportunity to explain the
delegation of these duties to the OSDBU Operations Director. We note
that while the survey was designed to capture the OSDBU director's
activities (and not the delegation of such duties per se), there were
numerous open-ended questions that allowed respondents to add
explanations or qualifications to their responses. State also had the
opportunity to explain the delegation of duties during our interviews
with OSDBU officials.
As agreed with your office, unless you publicly announce the contents
of this report earlier, we plan no further distribution until 30 days
from the report date. At that time, we will send copies of this report
to the Ranking Member of the Senate Committee on Small Business and
Entrepreneurship, the Chairman and Ranking Member of the House
Committee on Small Business, and other interested congressional
committees. The report will also be available at no charge on the GAO
Web site at [hyperlink, http://www.gao.gov].
If you or your office have any questions about this report, please
contact me at (202) 512-8678 or shearw@gao.gov. Contact points for our
Offices of Congressional Relations and Public Affairs may be found on
the last page of this report. Key contributors to this report are
listed in appendix XI.
Sincerely yours,
Signed by:
William B. Shear:
Director, Financial Markets and Community Investment:
[End of section]
Appendix I: Scope and Methodology:
We reviewed Office of Small and Disadvantaged Business Utilization
(OSDBU) practices for carrying out the requirements of the Small
Business Act at federal agencies with major contracting activity.
Specifically, we (1) assessed whether the director reported directly
to the agency head or the deputy head; (2) determined the functions
conducted by the OSDBUs; and (3) examined the actions taken by the
OSDBUs and other officials at the various agencies to further small
business contracting opportunities and the effects of funding and
staff levels on these efforts.
Identification of Federal Agencies with Major Contracting Activity:
To determine which federal agencies engage in major contracting
activity, we reviewed fiscal year 2009 data from the Federal
Procurement Data System-Next Generation. (These were the most recent
data available at the time of our review.) This dataset includes
information on 20 defense agencies and 62 civilian agencies.[Footnote
37] Using these data, we determined that seven agencies each procured
more than $15 billion in goods and services in fiscal year 2009.
[Footnote 38] Table 7 shows the seven agencies with major contracting
activity as well as the other agencies covered in our review.
Table 7: 25 Federal Agencies at Which GAO Conducted Work:
Agency: Defense Logistics Agency;
Agency with major contracting activity[A]: [Check];
Agency assessed for compliance with section 15(k)(3) of Small Business
Act: [Check];
Agency surveyed: [Check].
Agency: Department of Agriculture;
Agency with major contracting activity[A]: [Empty];
Agency assessed for compliance with section 15(k)(3) of Small Business
Act: [Check];
Agency surveyed: [Check].
Agency: Department of Commerce;
Agency with major contracting activity[A]: [Empty];
Agency assessed for compliance with section 15(k)(3) of Small Business
Act: [Check];
Agency surveyed: [Check].
Agency: Department of Defense--Office of the Secretary;
Agency with major contracting activity[A]: [Empty];
Agency assessed for compliance with section 15(k)(3) of Small Business
Act: [Empty];
Agency surveyed: [Check].
Agency: Department of Education;
Agency with major contracting activity[A]: [Empty];
Agency assessed for compliance with section 15(k)(3) of Small Business
Act: [Check];
Agency surveyed: [Check].
Agency: Department of Energy;
Agency with major contracting activity[A]: [Check];
Agency assessed for compliance with section 15(k)(3) of Small Business
Act: [Check];
Agency surveyed: [Check].
Agency: Department of Health and Human Services;
Agency with major contracting activity[A]: [Check];
Agency assessed for compliance with section 15(k)(3) of Small Business
Act: [Check];
Agency surveyed: [Check].
Agency: Department of Homeland Security;
Agency with major contracting activity[A]: [Empty];
Agency assessed for compliance with section 15(k)(3) of Small Business
Act: [Empty];
Agency surveyed: [Check].
Agency: Department of Housing and Urban Development;
Agency with major contracting activity[A]: [Empty];
Agency assessed for compliance with section 15(k)(3) of Small Business
Act: [Empty];
Agency surveyed: [Check].
Agency: Department of Justice;
Agency with major contracting activity[A]: [Empty];
Agency assessed for compliance with section 15(k)(3) of Small Business
Act: [Check];
Agency surveyed: [Check].
Agency: Department of Labor;
Agency with major contracting activity[A]: [Empty];
Agency assessed for compliance with section 15(k)(3) of Small Business
Act: [Empty];
Agency surveyed: [Check].
Agency: Department of State;
Agency with major contracting activity[A]: [Empty];
Agency assessed for compliance with section 15(k)(3) of Small Business
Act: [Check];
Agency surveyed: [Check].
Agency: Department of the Air Force;
Agency with major contracting activity[A]: [Check];
Agency assessed for compliance with section 15(k)(3) of Small Business
Act: [Check];
Agency surveyed: [Check].
Agency: Department of the Army;
Agency with major contracting activity[A]: [Check];
Agency assessed for compliance with section 15(k)(3) of Small Business
Act: [Check];
Agency surveyed: [Check].
Agency: Department of the Interior;
Agency with major contracting activity[A]: [Empty];
Agency assessed for compliance with section 15(k)(3) of Small Business
Act: [Check];
Agency surveyed: [Check].
Agency: Department of the Navy;
Agency with major contracting activity[A]: [Check];
Agency assessed for compliance with section 15(k)(3) of Small Business
Act: [Check];
Agency surveyed: [Check].
Agency: Department of the Treasury;
Agency with major contracting activity[A]: [Empty];
Agency assessed for compliance with section 15(k)(3) of Small Business
Act: [Check];
Agency surveyed: [Check].
Agency: Department of Transportation;
Agency with major contracting activity[A]: [Empty];
Agency assessed for compliance with section 15(k)(3) of Small Business
Act: [Empty];
Agency surveyed: [Check].
Agency: Department of Veterans Affairs;
Agency with major contracting activity[A]: [Empty];
Agency assessed for compliance with section 15(k)(3) of Small Business
Act: [Empty];
Agency surveyed: [Check].
Agency: Environmental Protection Agency;
Agency with major contracting activity[A]: [Empty];
Agency assessed for compliance with section 15(k)(3) of Small Business
Act: [Check];
Agency surveyed: [Check].
Agency: General Services Administration;
Agency with major contracting activity[A]: [Empty];
Agency assessed for compliance with section 15(k)(3) of Small Business
Act: [Empty];
Agency surveyed: [Check].
Agency: National Aeronautics and Space Administration;
Agency with major contracting activity[A]: [Check];
Agency assessed for compliance with section 15(k)(3) of Small Business
Act: [Check];
Agency surveyed: [Check].
Agency: Office of Personnel Management;
Agency with major contracting activity[A]: [Empty];
Agency assessed for compliance with section 15(k)(3) of Small Business
Act: [Empty];
Agency surveyed: [Check].
Agency: Social Security Administration;
Agency with major contracting activity[A]: [Empty];
Agency assessed for compliance with section 15(k)(3) of Small Business
Act: [Check];
Agency surveyed: [Check].
Agency: U.S. Agency for International Development;
Agency with major contracting activity[A]: [Empty];
Agency assessed for compliance with section 15(k)(3) of Small Business
Act: [Empty];
Agency surveyed: [Check].
Agency: Total;
Agency with major contracting activity[A]: 7;
Agency assessed for compliance with section 15(k)(3) of Small Business
Act: 16;
Agency surveyed: 25.
Source: GAO.
[A] The seven agencies with major contracting activity each procured
more than $15 billion in goods and services in fiscal year 2009.
[End of table]
Assessment of Compliance with Section 15(k)(3) of the Small Business
Act:
To assess whether the OSDBU director reports directly to the agency
head or the deputy head as required by section 15(k)(3) of the Small
Business Act, we focused on the seven agencies with major contracting
activity and nine additional agencies that we reported in September
2003 were not complying with this requirement.[Footnote 39] These nine
agencies were the Departments of Agriculture, Commerce, Education, the
Interior, Justice, State, and the Treasury; the Environmental
Protection Agency; and the Social Security Administration.[Footnote
40] We considered agencies to be in compliance if the designated OSDBU
directors exercised the OSDBU responsibilities and reported directly
to and were responsible only to the agency head or the agency head's
deputy. To determine compliance, we reviewed organization charts to
identify where the OSDBU was located in relation to the agency head or
deputy head; OSDBU directors' performance appraisals for the previous
2 years to identify the agency official who evaluated the OSDBU
director's performance;[Footnote 41] the most recent position
description of the OSDBU director to identify the OSDBU director's
supervisor; and various other agency documents, such as reports and
memoranda discussing the agency's small business programs. We also
interviewed the designated OSDBU directors at each agency to identify
the official(s) they had reported to during the past year and asked
them to provide information characterizing the reporting relationship,
such as the extent to which small business issues were discussed. In
addition, we reviewed and analyzed section 15(k)(3).
Survey of OSDBU Directors:
To obtain information on the functions conducted by the OSDBU, actions
taken by the OSDBU to further small business contracting
opportunities, and the effects of funding and staff levels on these
efforts, we surveyed the OSDBU directors at 25 federal agencies using
a Web-based survey. The survey was similar to one we administered in
2003 and asked the OSDBU directors about their roles and functions in
three areas: participation in the agency procurement process,
facilitation of small business participation in agency contracting,
and interaction with the Small Business Administration (SBA).[Footnote
42] The survey questions covered the OSDBU functions listed in 15(k)
of the Small Business Act as well as additional functions the OSDBUs
might perform. In addition, the survey asked OSDBU directors about
challenges--including limited budgetary resources and lack of adequate
staffing levels--they face in carrying out their responsibilities.
Selection of Survey Respondents:
We selected 25 agencies to include in our survey of OSDBU directors.
These agencies included all 20 civilian agencies that procured more
than $800 million in goods and services in fiscal year 2009, as well
as the Department of Defense (DOD)--Office of the Secretary; the
Departments of the Air Force, Army, and Navy; and the Defense
Logistics Agency (DLA). The 20 agencies were responsible for more than
98 percent of civilian agency obligations in fiscal year 2009. We
selected the Air Force, Army, Navy, and DLA because they were the four
components within DOD that procured the most goods and services in
fiscal year 2009; together, they were responsible for more than 90
percent of DOD's obligations. The 25 agencies we selected included all
24 agencies we surveyed in 2003 and the Department of Homeland
Security.[Footnote 43]
Survey Design and Administration:
To have comparable data with the 2003 survey of OSDBU directors, our
survey instrument listed the same questions and response choices as
the 2003 survey. Updates to the 2003 survey were limited to making
minor word changes, reordering several questions, and deleting several
questions that were no longer relevant. We obtained input from GAO
experts on survey design. We also pretested the survey instrument with
two OSDBU directors to help ensure that the questions were still
applicable and would be correctly interpreted by respondents. Agency
officials, including the OSDBU directors, were notified about the
survey before it was launched on November 1, 2010.[Footnote 44] OSDBU
directors were asked to complete the survey by November 22, 2010, and
by December 29, 2010, we had a 100 percent response rate.[Footnote 45]
From January to March 2011, we conducted follow-up with 22 OSDBU
directors who answered that one or more of the functions listed in
15(k) of the Small Business Act was not a function of their office or
who did not provide responses to these questions. The purpose of the
follow-up was to determine which office, if not the OSDBU, carried out
these functions at their agency or to collect answers from OSDBU
directors who did not provide them initially. To do this, we conducted
interviews with 11 ODSBU directors and corresponded via e-mail with 11
others. Based on this follow-up, we changed 16 of the original survey
answers related to whether the OSDBU director viewed a section 15(k)
responsibility as an OSDBU role. Answers were changed only if at least
one of the following criteria were satisfied: the OSDBU directors
explicitly stated that they wished to change their answer and provided
an explanation for the change; the director misunderstood the
question; or the director provided a response to an initially
unanswered question.
Additionally, we asked 11 of the 22 OSDBU directors with whom we were
conducting follow-up for further explanation of challenges they had
identified as affecting their office to a great or very great extent.
Two of the respondents requested that we change their responses to
several challenges due to initially misunderstanding the question. We
agreed and these adjustments are reported in our findings. Also, as
necessary, we followed-up with OSDBU directors to clarify their
responses to our open-ended questions.
While the OSDBU directors at 25 agencies were asked to participate in
the survey and the survey results are therefore not subject to
sampling errors, not all respondents answered every question.
Nonresponse, including item nonresponse, and the practical
difficulties of conducting any survey, may introduce error in survey
results. We took steps to minimize such errors by conducting follow-up
discussions with respondents who failed to answer specific questions,
and by checking and verifying survey responses and analysis.
Survey Analysis:
The survey contained closed-ended questions that we asked OSDBU
directors to answer by selecting from a finite number of response
categories. For example, some questions asked OSDBU directors to
select "Yes--an OSDBU role or function" or "No--not an OSDBU role or
function" based on if a certain function was performed by their
office. Other questions asked OSDBU directors to identify the extent
to which they performed a certain function or the extent to which a
certain factor was a challenge in carrying out the responsibilities of
their office. Our analysis involved reviewing the frequency of
responses to a given question using aggregate survey data. In the
report, there are instances in which we identify all of the responses
and other instances in which we identify the most common response.
This report does not contain all the results from the survey; the
survey and a more complete tabulation of the results are provided in a
supplement to this report [hyperlink,
http://www.gao.gov/products/GAO-11-436SP].
The survey also contained open-ended questions that asked OSDBU
directors to provide a narrative response. Most of these open-ended
questions provided respondents the opportunity to explain answers
provided to close-ended questions. For example, some closed-ended
questions asked the respondents if a certain activity was a function
of their office and the subsequent open-ended question asked them to
elaborate on which office carries out this role or function if they
had responded "No--not an OSDBU role or function" to the prior
question. We used these open-ended responses to provide context to
close-ended questions, and some of these narrative responses were
included in our findings.
Interviews with Agency Officials and Review of Agency Documents:
To examine the actions taken by the OSDBU and other agency officials
to further small business contracting opportunities and the effects of
funding and staff levels, we interviewed agency officials and reviewed
documents at the seven agencies with major contracting activity. Also,
we reviewed agency documentation, such as policy statements issued by
agency leadership on ODSBU practices or small business efforts, small
business manuals or strategic plans, and budget and staffing
documentation. We interviewed the OSDBU directors at the seven
agencies on the actions they and other agency officials had taken to
further small business contracting; methods used by SBA and the agency
to hold officials accountable for furthering small business
contracting; and challenges that affected these efforts, such as
funding and staffing levels. Furthermore, we reviewed documentation
and data related to the SBA small business goaling program and spoke
with SBA officials about this program and reviewed OSDBU council
documentation and spoke with council leadership.
We conducted our work from June 2010 to May 2011 in accordance with
generally accepted government auditing standards. Those standards
require that we plan and perform the audit to obtain sufficient,
appropriate evidence to provide a reasonable basis for our findings
and conclusions based on our audit objectives. We believe the evidence
obtained provides a reasonable basis for our findings and conclusions
based on our audit objectives.
[End of section]
Appendix II: Reporting Relationships at Seven Agencies Not in
Compliance with Section 15(k)(3):
As discussed in the body of our report, seven agencies were not in
compliance with section 15(k)(3) of the Small Business Act, which
requires that the director of the Office of Small and Disadvantaged
Business Utilization (OSDBU) be responsible only to and report
directly to the agency head or deputy head. We found that a variety of
reporting structures were in place. OSDBU directors either reported to
lower-level officials than the agency head or deputy or had delegated
their OSDBU director responsibilities to officials who did not report
to either the agency head or the deputy head.
OSDBU Directors at Four Agencies Did Not Report to the Agency Head or
Deputy Head:
At the Departments of Commerce, the Interior, and Justice and the
Social Security Administration (SSA), the OSDBU directors reported to
officials at lower levels than the agency head or deputy head.
Department of Commerce:
A document outlining the organization structure of the Department of
Commerce's Office of the Chief Financial Officer and Assistant
Secretary for Administration stated that the OSDBU director reported
to the Deputy Secretary on matters of policy and to the Assistant
Secretary and Deputy Assistant Secretary for Administration on
administrative matters.[Footnote 46] However, the OSDBU director at
Commerce stated that she reported to the Deputy Assistant Secretary
for Administration for all small business matters and to the Assistant
Secretary for Administration for administrative matters such as budget
and personnel. The organization chart also showed a direct link from
the OSDBU to the Deputy Assistant Secretary for Administration and the
Assistant Secretary for Administration (see figure 3). In fiscal year
2009, the Assistant Secretary for Administration evaluated the OSDBU
director's performance, while the Deputy Assistant Secretary for
Administration signed her performance appraisal in fiscal year 2010.
The OSDBU director stated that she had never met the Secretary or
previous Deputy Secretary and only met the new Acting Deputy Secretary
in December 2010.
Figure 3: OSDBU Director's Reporting Relationship at the Department of
Commerce, as of April 2011:
[Refer to PDF for image: illustration]
Top level:
Secretary; Deputy Secretary.
Second level, reporting to Secretary/Deputy Secretary:
Chief Financial Officer/Assistant Secretary for Administration;
Deputy Assistant Secretary for Administration.
Third level:
OSDBU Director:
Mandated reporting relationship: to Secretary/Deputy Secretary;
Actual reporting relationship: to Chief Financial Officer/Assistant
Secretary for Administration;
Deputy Assistant Secretary for Administration.
Source: GAO.
[End of figure]
Department of the Interior:
The OSDBU director at the Department of the Interior reported to the
Deputy Assistant Secretary for Budget, Finance, Performance, and
Acquisition and to the Assistant Secretary, Policy, Management and
Budget (see figure 4). The organization chart had a notation that the
OSDBU director reported to the Secretary and received administrative
support from the Deputy Assistant Secretary for Budget, Finance,
Performance, and Acquisition, who in turn reported to the Assistant
Secretary, Policy, Management and Budget. However, the OSDBU director
told us he had never met with the Secretary or Deputy Secretary and
they had not provided direct input into his performance appraisals.
Instead, the OSDBU director told us he met frequently with the Deputy
Assistant Secretary for Budget, Finance, Performance, and Acquisition
on administrative and small business matters. The director's position
description indicated that the director reports to the Deputy
Assistant Secretary. His two most recent performance appraisals were
signed by the Deputy Assistant Secretary and the Assistant Secretary
for Policy, Management and Budget, respectively.
Figure 4: OSDBU Director's Reporting Relationship at the Department of
the Interior, as of April 2011:
[Refer to PDF for image: illustration]
Top level:
Secretary; Deputy Secretary.
Second level, reporting to Secretary/Deputy Secretary:
Assistant Secretary, Policy, Management and Budget.
Third level, reporting to Assistant Secretary, Policy, Management and
Budget:
Deputy Assistant Secretary for Budget, Finance, Performance,and
Acquisition.
Fourth level:
OSDBU Director:
Mandated reporting relationship: to Secretary/Deputy Secretary;
Actual reporting relationship: to Assistant Secretary, Policy,
Management and Budget and Deputy Assistant Secretary for Budget,
Finance, Performance,and Acquisition.
Source: GAO.
[End of figure]
Department of Justice:
As shown in figure 5, the OSDBU director at Justice reported to the
Deputy Assistant Attorney General for Policy, Management and Planning.
OSDBU officials told us the current reporting structure was the same
structure that was in place in 2003. The organization chart showed
that the OSDBU was located within the Justice Management Division,
with the director under the supervision of the Deputy Assistant
Attorney General for Policy, Management and Planning. The Justice
Management Division was headed by the Assistant Attorney General for
Administration, who reports to the Deputy Attorney General. While the
organization chart showed that the OSDBU was located within the
Justice Management Division for administrative purposes, the OSDBU
director's position description listed his immediate supervisor as the
Deputy Assistant Attorney General for Policy, Management and Planning.
The Deputy Assistant Attorney General signed the OSDBU director's two
most recent performance appraisals.
Figure 5: OSDBU Director's Reporting Relationship at the Department of
Justice, as of April 2011:
[Refer to PDF for image: illustration]
Top level: Attorney General; Deputy Attorney General.
Second level, reporting to Attorney General; Deputy Attorney General:
Justice Management Division; Assistant Attorney General for
Administration.
Third level, reporting to Justice Management Division; Assistant
Attorney General for Administration:
Deputy Assistant Attorney General, Policy, Management and Planning.
Fourth level:
OSDBU Director:
Mandated reporting relationship: to Attorney General; Deputy Attorney
General;
Actual reporting relationship: to Deputy Assistant Attorney General,
Policy, Management and Planning.
Source: GAO.
[End of figure]
Social Security Administration:
The OSDBU director at SSA reported to the Deputy Commissioner, Office
of Budget, Finance and Management, who was one of nine deputy
commissioners managing various programs and operations (see figure 6).
Both the organization chart and the OSDBU director's position
description confirmed this reporting relationship. The OSDBU director
told us that he reported to this Deputy Commissioner for small
business matters. Additionally, the director's most recent performance
appraisal was signed by the Deputy Commissioner, Office of Budget,
Finance and Management. The director confirmed that this same
structure was in place in 2003.[Footnote 47] The OSDBU director also
told us he had never met either the Commissioner or Deputy
Commissioner of SSA.
Figure 6: OSDBU Director's Reporting Relationship at the Social
Security Administration, as of April 2011:
[Refer to PDF for image: illustration]
Top level: Commissioner; Deputy Commissioner.
Second level, reporting to Commissioner; Deputy Commissioner:
Deputy Commissioner, Office of Budget, Finance and Management.
Third level:
OSDBU Director:
Mandated reporting relationship: to Commissioner; Deputy Commissioner;
Actual reporting relationship: to Deputy Commissioner, Office of
Budget, Finance and Management.
Source: GAO.
[End of figure]
OSDBU Directors at Three Agencies Delegated Their OSDBU
Responsibilities to Lower-Level Officials:
As we found in our 2003 report, the designated OSDBU directors at the
Departments of Agriculture, State, and the Treasury delegated their
responsibilities to officials who did not directly report to either
the Secretaries or Deputy Secretaries. At these agencies, the
Assistant Secretary who managed the agency's administrative functions
was designated as the statutory OSDBU director. The Assistant
Secretaries then delegated nearly all of their OSDBU responsibilities
to lower-ranking officials who reported directly to the Assistant
Secretaries. The lower-ranking officials thus became the de facto
OSDBU directors.
Department of Agriculture:
The designated OSDBU director at the Department of Agriculture was the
Assistant Secretary for Administration, who reported to the Secretary
and Deputy Secretary. However, the Assistant Secretary had delegated
nearly all of his OSDBU responsibilities to a lower-level official
(see figure 7). This structure was the same one that we determined in
2003 was not in compliance with the Small Business Act. The delegated
OSDBU director told us that he did not report to the Secretary or
Deputy Secretary on matters involving policy, budget, and personnel.
The agency's organization chart confirmed that the delegated OSDBU
director reported to the Assistant Secretary for Administration. The
Assistant Secretary for Administration and the Secretary signed the
director's most recent performance appraisal.
Figure 7: OSDBU Director's Reporting Relationship at the Department of
Agriculture, as of April 2011:
[Refer to PDF for image: illustration]
Top level:
Secretary; Deputy Secretary.
Second level, reporting to Secretary; Deputy Secretary:
Assistant Secretary for Administration (designated OSDBU director).
Third level:
OSDBU Director (delegated director):
Mandated reporting relationship: to Secretary; Deputy Secretary;
Actual reporting relationship: to Assistant Secretary for
Administration (designated OSDBU director).
Source: GAO.
[End of figure]
Other evidence showed that the delegated OSDBU director carried out
the day-to-day implementation of the agency's OSDBU. The delegated
director told us he handled the day-to-day duties and functions of
Agriculture's OSDBU and that he spent 100 percent of his time on OSDBU
duties and functions. Moreover, his position description indicated
that he was the official responsible for carrying out the duties and
functions listed under section 15(k). The position description stated,
among other things, that the delegated director was responsible for
(1) establishing short-and long-range program objectives, time
schedules, and courses of action for the accomplishment of small
business goals; (2) formulating, recommending, and implementing broad
policies and procedures that provide the structural framework for all
OSDBU functions; and (3) keeping abreast of all OSDBU activities and
initiating any corrective actions deemed necessary. In contrast, OSDBU
officials stated that the Assistant Secretary for Administration spent
time on OSDBU activities on an as-needed basis but estimated that it
averaged about 3 to 4 hours per week.
Department of State:
The Assistant Secretary for Administration was the designated OSDBU
director at the State Department. The Assistant Secretary, who
reported to one of the department's two Deputy Secretaries on small
business matters, had delegated his OSDBU responsibilities to the
Operations Director for the OSDBU (see figure 8). In fiscal year 2010,
the Operations Director's performance appraisal was signed by the
Acting Assistant Secretary for Administration. The position
description for the Operations Director indicated that he carried out
the functions of the OSDBU director. For example, it showed that his
duties included (1) providing overall direction for policies and
programs governing the agency's procurement and financial assistance
actions in accordance with the Small Business Act and (2) developing
small business goals.
Figure 8: OSDBU Director's Reporting Relationship at the Department of
State, as of April 2011:
[Refer to PDF for image: illustration]
Top level:
Secretary; Deputy Secretary (2).
Second level, reporting to Secretary; Deputy Secretary (2):
Assistant Secretary for Administration (designated OSDBU director).
Third level:
OSDBU Director (delegated OSDBU director):
Mandated reporting relationship: to Secretary; Deputy Secretary (2);
Actual reporting relationship: to Assistant Secretary for
Administration (designated OSDBU director).
Source: GAO.
[End of figure]
Department of the Treasury:
The Assistant Secretary of the Treasury for Management/Chief Financial
Officer/Chief Performance Officer was the designated OSDBU director.
He stated that he was responsible for meeting the agency's small
business goals and interacted with the Secretary and Deputy Secretary
regularly, including providing updates on small business matters.
However, the Director of the Office of Small Business Programs--an
official who did not directly report to either the Secretary or the
Deputy Secretary--was responsible for day-to-day management of
Treasury's small business programs. According to Treasury, the
Director of the Office of Small Business Programs reported to the
Director of the Office of Minority and Women Inclusion, who in turn
reported to the Assistant Secretary (see figure 9).[Footnote 48] The
Director of the Office of Small Business Programs stated that she
spent 100 percent of her time on small business matters, which
included all of the functions described in section 15(k) of the Small
Business Act. Her position description confirmed this statement,
indicating that her responsibilities included (1) planning,
developing, issuing, and providing overall direction for policies and
programs governing Treasury procurement and financial assistance
action in accordance with the Small Business Act and (2) directing
Treasury's annual goal-setting process.
Figure 9: OSDBU Director's Reporting Relationship at the Department of
the Treasury, as of April 2011:
[Refer to PDF for image: illustration]
Top level:
Secretary; Deputy Secretary.
Second level, reporting to Secretary; Deputy Secretary:
Assistant Secretary for Management and Chief Financial Officer
(designated OSDBU director).
Third level, reporting to Assistant Secretary for Management and Chief
Financial Officer (designated OSDBU director):
Director, Office of Minority and Women Inclusion.
Fourth level:
Director, Office of Small Business Programs (delegated OSDBU Director):
Mandated reporting relationship: to Secretary; Deputy Secretary;
Actual reporting relationship: to Director, Office of Minority and
Women Inclusion.
Source: GAO.
[End of figure]
[End of section]
Appendix III: Office of Small and Disadvantaged Business Utilization
Directors Who Reported that They Did Not Carry Out Certain 15(k)
Functions:
The number of Office of Small and Disadvantaged Business Utilization
(OSDBU) directors surveyed who did not view a section 15(k) function
as their current responsibility varied, depending on the specific
function. The number ranged from 1 who did not view maintaining
supervisory authority over OSDBU personnel as a function to 11 who did
not view assisting small businesses to obtain payments from prime
contractors as a responsibility. In their written comments and follow-
up interviews, the directors who did not view a section 15(k) function
as their responsibility generally stated that contracting,
acquisition, or program staff performed it.
* The OSDBU director at the Social Security Administration (SSA)
reported that maintaining supervisory authority over OSDBU personnel
was not a function of his office because he did not have staff.
* The OSDBU director at the Office of Personnel Management (OPM)
reported that attempting to identify proposed solicitations that
involved bundling of contract requirements was not a function of his
office. He commented that the contracting office within his agency
performed this function.
* The OSDBU director at SSA reported that working with agency
acquisition officials to revise procurement strategies for bundled
contract requirements was not a function of his office. He commented
that no office carried out this role. Rather, he noted that when
contract bundling was identified, the acquisition official prepared a
bundling justification for the head of the procuring activity to sign.
In a follow-up interview, he clarified that nothing in the agency's
policies required coordination with the OSDBU on contract bundling or
gave the OSDBU the opportunity to revise procurement strategies.
* Five OSDBU directors reported that facilitating small businesses'
participation as subcontractors to bundled contracts was not a
function of their office. At the Department of Agriculture and OPM,
the OSDBU directors commented that their agencies had not bundled any
contracts. The Agriculture OSDBU director also stated that his office
evaluates proposed contract actions to ensure that there are no
bundled contracts. The OSDBU director at the Office of the Secretary
of Defense reported that this function was generally performed by the
contracting offices at the Department's individual components, such as
the Army, Navy, Air Force, and Defense Logistics Agency (DLA). In a
follow-up interview, the OSDBU director at SSA stated that his role
was limited by agency policy to reviewing subcontracting plans to
ensure that certain clauses required by the Federal Acquisition
Regulation were included. He noted that he would need additional
resources to advocate for increased small business participation in
subcontracting. The OSDBU director at the Department of Commerce
explained that the OSDBU did not have the staff to review
subcontracting plans.
* Six OSDBU directors reported that assisting small businesses to
obtain payments from their agencies was not a function of their
office. All six directors--Departments of the Air Force, Education,
and the Interior; the Environmental Protection Agency (EPA); Office of
the Secretary of Defense; and SSA--reported that payment issues were
addressed by agency officials in the contracting, acquisition, or
program offices.
* Seven OSDBU directors reported that determining a small business set-
aside for an individual contract was not a function of their OSDBU.
Five of these directors (Departments of the Army, Education, and
Housing and Urban Development (HUD); the Office of the Secretary of
Defense; and OPM) commented that their agency's contracting or program
offices performed this function. The OSDBU directors at the
Departments of Transportation and Energy commented that they reviewed
acquisitions over a certain threshold level ($150,000 at
Transportation and $3 million at Energy).
* Ten OSDBU directors reported that assigning a small business
technical advisor to each office with an SBA procurement center
representative was not a function of their office. In follow-up
communication, the Acting OSDBU director at the Department of Veterans
Affairs (VA) explained that his office had not assigned a small
business technical advisor to each office with a procurement center
representative but noted that OSDBU staff performed duties similar to
those of a technical advisor. The Acting OSDBU director at the
Department of Energy explained that because the agency had already
implemented several levels of review by various technical and
procurement staff, it had delayed hiring and assigning a technical
advisor to contracting offices. However, he stated that the office was
reassessing their review processes and resources to determine when
such a hire would be feasible. The remaining eight OSDBU directors at
the Departments of the Air Force, the Army, Commerce, the Interior,
Justice, the Navy, and Transportation and DLA reported that the
contracting offices within their agencies assigned small business
technical advisors. For instance, Air Force officials commented that
small business technical advisors were assigned only to field sites
where they could assist in identifying specific opportunities for
small businesses.
* Eleven OSDBU directors reported that assisting small businesses to
obtain payments from prime contractors was not one of their functions.
Seven of these directors (Departments of Agriculture, the Air Force,
and Education; EPA; HUD; Office of the Secretary of Defense; and SSA)
commented that contracting, acquisition, or program officials carried
out this function at their agencies. Two of the seven directors
clarified in follow-up interviews that they were not privy to
subcontractor information. The OSDBU director at OPM commented that
because the payment of invoices by a prime contractor to its
subcontractors is part of a contractual arrangement to which the
government is not a party, this function should not be performed by
anyone at the agency. The OSDBU director at the Department of
Transportation commented that the office provides counseling on
progress payments and prompt payment guidance to small businesses. The
OSDBU directors at Interior and the U.S. Agency for International
Development commented that if a small business were to contact the
OSDBU for payment assistance, the OSDBU would facilitate communication
with the contracting officer responsible for payments.
[End of section]
Appendix IV: Comments from the Department of Education:
United States Department Of Education:
The Deputy Secretary:
400 Maryland Ave. S.W.
Washington, DC 20202:
[hyperlink, http://www.ed.gov]
May 13, 2011:
Mr. William B Shear:
Director, Financial Markets and Community Investment Issues:
Government Accountability Office:
Washington, DC 20548:
Dear Mr. Shear:
Thank you for the opportunity to review the draft report entitled,
"Small Business Contracting: Action Needed by Those Agencies Whose
Advocates Do Not Report to Agency Heads as Required" (GA0-11-418). We
are pleased that the report concluded that the U.S. Department of
Education is in compliance with reporting requirements, as stipulated
in Section 15(k) of the Small Business Act, and that there is no need
for any recommendations to the Department regarding the functioning of
the Office of Small and Disadvantaged Business Utilization (OSDBU).
Since GAO's report in 2003 found that the Department should correct
certain deficiencies about the reporting structure of the OSDBU, the
Department has taken definitive corrective steps to achieve and remain
in compliance with all applicable requirements. For example, pursuant to
Section 15(k)(3) of the Small Business Act, the Department's OSDBU
Director reports directly to the Deputy Secretary, thus providing the
Director with direct access to the top leadership in the Department.
We appreciate the valuable information in the draft report and are
pleased with GAO's recognition of the Department's changes to the
reporting structure and to the important work performed by the OSDBU.
The Department and OSDBU take the significant functions of the
OSDBU seriously, and we work on a "continuous improvement model" to
make its operations as effective as possible. I would also like to
note that while it was reported that functions referenced in the
footnotes on page 17 and discussed further in corresponding bullets on
pages 57 and 58 are not primary functions of the Department's OSDBU,
the Department's OSDBU does play an active role in carrying out these
functions through ongoing collaboration with other Department offices
as appropriate.
Dr. Kristi Wilson Hill, our OSDBU Director, is available if you or
members of your staff have any questions, She can be reached by
telephone at (202) 245-6301 or by e-mail at Kristi.Wilson@ED.gov.
Sincerely,
Signed by:
Anthony W. Miller:
[End of section]
Appendix V: Comments from the Department of Commerce:
United States Department Of Commerce:
Chief Financial Officer and Assistant Secretary for Administration
Washington, DC 20230:
William B. Shear:
Director:
Financial Markets and Community Investment Issues:
U.S. Government Accountability Office:
441 G. Street, N.W.
Washington, D.C. 20548:
Dear Mr. Shear:
Thank you for the opportunity to comment on the draft Government
Accountability Office report entitled, "Small Business Contracting:
Action Needed by Those Agencies Whose Advocates Do Not Report to
Agency Heads as Required (GAO-11-418)."
The Director of the Office of Small and Disadvantaged Business
Utilization (OSDBU) reports directly to the Deputy Secretary on all
legislative and policy issues and to the Chief Financial Officer and
Assistant Secretary for Administration on administrative matters such
as personnel and budget. I believe this organizational structure
complies with the provisions of section I 5(k) of the Small Business
Act, strengthens the role of OSDBU within the Department, and focuses
the Department's resources to create contracting opportunities for
small businesses.
The Department of Commerce is deeply committed to the goals of the
Small Business Act and our record of small business goal achievement
reflects our determination to create opportunities for small, small
disadvantaged, women-owned, HUBZone, and service-disabled veteran-
owned small business concerns. The Department has exceeded its small,
small disadvantaged, women-owned, and service-disabled veteran-owned
business goals this year. The Department also received a preliminary
score of an A from the Small Business Administration for its Fiscal
Year 2010 Scorecard, up from a C in Fiscal Year 2009.
If you have any questions, please contact Fred Stephens, Deputy
Assistant Secretary for Administration, at (202) 482-4951.
Sincerely,
Signed by:
Scott B. Quehl:
Chief Financial Officer and Assistant Secretary for Administration:
[End of section]
Appendix VI: Comments from the Department of the Interior:
United States Department of the Interior:
Office Of The Secretary:
W2shington, DC 20240:
May 11, 2011:
Mr. William B. Shear:
Director, Financial Markets and Community Investment Issues:
Government Accountability Office:
441 G Street, N.W.
Washington, D.C. 20548:
Dear Mr. Shear:
Thank you for the opportunity to review and comment on the Government
Accountability Office (GAO) draft report entitled, Small Business
Contracting: Action Needed by Those Agencies Whose Advocates Do Not
Report to Agency Heads as Required, (GAO-11-418).
GAO's report states that the Department of the Interior does not
comply with the Small Business Act requirement that the Office of
Small and Disadvantaged Business Utilization report to the Secretary
or Deputy Secretary. GAO recommends that the Department of the
Interior comply with this requirement or report to Congress and could
seek statutory flexibilities or exceptions.
The Department does not have comments on the draft report, but will be
evaluating GAO's recommendation and evaluating options to resolve this
issue. We are being diligent about this issue as DOI has a high
performing small business program with over 50 percent of contract
actions awarded to small and disadvantaged businesses.
We will be reporting back to GAO once we have finalized our plans. If
you have any questions, please contact Pam Haze, Deputy Assistant
Secretary — Budget, Finance, Performance and Acquisition at (202) 208-
4775.
Sincerely,
Signed by:
Rhea S. Suh:
Assistant Secretary:
Policy, Management and Budget:
[End of section]
Appendix VII: Comments from the Department of Justice:
U.S. Department of Justice:
Justice Management Division:
Washington, D.C. 20530:
May 11, 2011:
William B Shear:
Director, Financial Markets and Community Investment Issues:
U.S. Government Accountability Office:
441 G Street, NW:
Washington, DC 20548:
Dear Mr. Shear:
On April 28, 2011, you provided the Department with a copy of the
Government Accountability Office's draft report entitled Small
Business Contracting: Action Needed by Those Agencies Whose
Advocates Do Not Report to Agency Heads as Required (GA0-11-418) with
a request for comments by May 13, 2011. We appreciate the opportunity
to review and comment on the draft report.
While the Department agrees that the Office of Small and Disadvantaged
Business Utilization (OSDBU) is located within the Justice Management
Division, this placement has been, and remains as such, for
administrative purposes. Through this organizational structure, the
Deputy Attorney General ensures that small businesses are provided the
maximum practicable opportunity to participate in contracting
opportunities throughout the Department both as prime contractors and
subcontractors. The administrative placement of OSDBU within the
Justice Management Division is not a reflection on the Department's
commitment to the small business programs. Rather, it is reflection of
how that Office may best advocate for the use of small businesses in
our contracting efforts. The Department feels that the current
placement of the OSDBU allows for the efficient management and
implementation of the small business contracting programs that are
vital to the Department in satisfying its mission. As the Department
has previously advised GAO and the Congress, the Director, OSDBU
reports directly to the Deputy Attorney General on matters of
substance requiring his direct attention.
If you have any questions concerning the Department's response on this
matter, please contact Richard Theis, Department of Justice Audit
Liaison on (202) 514-0469.
Sincerely,
Signed by:
Lee. L. Lofthaus:
Assistant Attorney General for Administration:
[End of section]
Appendix VIII: Comments from the Department of State:
United States Department of State:
Chief Financial Officer:
Washington, D.C. 20520:
May 12, 2011:
Ms. Jacquelyn Williams-Bridgers:
Managing Director:
International Affairs and Trade:
Government Accountability Office:
441 G Street, N.W.
Washington, D.C. 20548-0001:
Dear Ms. Williams-Bridgers:
We appreciate the opportunity to review your draft report,
"Small Business Contracting: Action Needed by Those Agencies Whose
Advocates Do Not Report to Agency Heads," GAO Job Code 250536.
The enclosed Department of State comments are provided for
incorporation with this letter as an appendix to the final report.
If you have any questions concerning this response, please contact
Shapleigh Drisko, Director, Bureau of Administration, Office of Small
and Disadvantaged Business Utilization at (703) 875-6823.
Sincerely,
Signed by:
James L. Millette:
cc: GAO - William B. Shear:
A - Will Moser:
State/OIG - Evelyn Klemstine:
[End of letter]
Department of State Comments on GAO Draft Report:
Small Business Contracting: Action Needed by Those Agencies Whose
Advocates Do Not Report to Agency Heads as Required (GA0-11-418, GAO
Code 250536):
The Department of State is pleased to respond to the GAO's report
regarding actions needed pertaining to placement of the Office of
Small and Disadvantaged Business Utilization (OSDBU). The report
recommends that State Department and other agencies found not in
compliance take steps to comply with the requirement of Section 15(k)
(3) of the Small Business Act that OSDBU directors be responsible only
to, and report directly to, the head or deputy head of the agency or
to report to Congress on why they have not complied including any
requests for regulatory flexibility as appropriate.
As stated in the report (p. 13), the Department of State has
designated the Assistant Secretary of State for Administration as the
Department's OSDBU Director. Section 211.2 of Volume 1 of the Foreign
Affairs Manual provides that the Assistant Secretary of State for
Administration "directs administrative oversight and services of the
Office of Small and Disadvantaged Business Utilization (A/SDBU), and
reports directly to the Deputy Secretary concerning its policies and
activities."
GAO finds the Department of State not to be in compliance with Section
15(k)(3) of the Small Business Act on two bases: 1) the Assistant
Secretary of State for Administration is not directly involved in the
day-to-day operations of the OSDBU, but has delegated these functions
to an Operations Director; 2) the Operations Director, whom GAO views
as the "true" OSDBU Director reports not to the Secretary or Deputy
Secretary but to the Assistant Secretary of State for Administration,
who in turn generally reports to the Under Secretary for Management.
Report at pp. 12-13. We respectfully dissent from GAO's conclusions on
both these points.
While OSDBU directors are responsible for the implementation and
execution of the specific functions and duties assigned under sections
8 and 15 of the Small Business Act, there is no requirement in Section
15(k)(3) that the director personally perform any specific functions.
The director, of course, remains responsible for OSDBU performance
whether he or she personally performs the functions or delegates
portions of the OSDBU authority. Executive Branch authority is
typically exercised through delegation, with an agency's basic
authority being vested in the agency head and subsequently
redelegated. Sometimes this redelegation authority is statutorily
recognized (e.g. 26 U.S.C. §7801) and in other cases it is implied,
See, Fleming v. Mohawk Wrecking & Lumber Co., 331 U.S. 121 (1947).
Accordingly, the Department of State concludes that the delegation of
functions from the Assistant Secretary of State for Administration as
statutory OSDBU Director to the OSDBU Operations Director is permitted
by Section 15(k)(3).
As noted above, the Department's Organization Manual 1 FAM
211.2(i). expressly provides that the Assistant Secretary for
Administration in his role as OSDBU Director "reports directly to the
Deputy Secretary" concerning OSDBU activities. The Department believes
this meets the requirements of Section 15(k) (3). To the extent that
this internal regulation may not have been called to GAO's attention
during its review, we apologize for the oversight. Moreover, while
this regulation may be viewed as merely addressing literal compliance
with Section 15(k)(3), placement of OSDBU Director responsibilities
with the Assistant Secretary of State for Administration addresses the
plain Congressional intent in enacting Section 15(k)(3) to give OSDBU
activities visibility and "clout" within the agency. Notwithstanding
the fact that for organizational chart purposes, the Assistant
Secretary of State for Administration reports to the Under Secretary for
Management, Assistant Secretaries in the Department can have direct
access to the Secretary and may report directly to her on matters of
importance in their respective bureaus. Assistant Secretaries attend
the Secretary's daily senior staff meetings. A mid-level employee
designated OSDBU Director would have no comparable access or
influence, no matter where placed on the organizational chart.
The Department of State does not take lightly dissent from the views
of the GAO. Nevertheless, the Department believes that the
effectiveness of OSDBU's operations depend on our organizational
arrangements and are borne out by the results of our program.
The Department has a history of small and disadvantaged business goal
achievements. In FY09, the Department's scorecard grade exceeded most
of the departments reported as being in full compliance with Section
15(k) (3). The Department has also consistently been increasing its
goal accomplishments across the board. A comparison of our FY09 and FY10
data reveals an increase of +.70% for small businesses, +2.29% for
small disadvantaged firms, +.73% for Service Disabled Veteran firms,
+.62% for woman owned firms and +1.0% for HUBZone firms.
The Department of State believes that to reorganize OSDBU so that its
Operations Director would report directly to the Secretary or her
Deputy would decrease efficiency. The OSDBU Operations Director
regularly meets with and attends the staff meeting of the Assistant
Secretary for Administration, who in addition to being the statutory
OSDBU Director is the senior Department official directly overseeing
Department acquisition programs. The OSDBU Operations Director
currently has direct access whenever necessary to decision makers in
the Department programs that utilize small and disadvantaged
businesses. The real objective of Section 15(k) (3) is to ensure that
the OSDBU program receives support from top management. The Department
of State has achieved that objective and has followed a reasonable
construction of the requirements of Section 15(k) (3) of the Small
Business Act.
[End of section]
Appendix IX: Comments from the Department of the Treasury:
Department Of The Treasury:
Assistant Secretary:
Washington, D.C.
May 13, 2011:
William B. Shear:
Director, Financial Markets and Community investment Issues:
Government Accountability Office (GAO):
Washington D.C.
Dear Mr. Shear:
This letter is in response to the draft GAO Report to the Chair,
Committee on Small Business and Entrepreneurship, U.S. Senate,
entitled, Small Business Contracting: Action Needed by Those Agencies
Whose Advocates Do Not Report to Agency Heads as Required, May 2011.
We wish to respectfully disagree with the reported conclusion that the
Department of the Treasury is not in compliance with section 15(k)(3)
of the Small Business Act, which requires directors of the Office of
Small and Disadvantaged Business Utilization (OSDBU) to report
directly to the agency or deputy agency head.
As indicated during the interviews conducted in preparation for the
report, the Assistant Secretary for Management (Assistant Secretary)
is the Treasury OSDBU Director. The Assistant Secretary for
Management, in the capacity of OSDBU Director, has a direct reporting
relationship to the Deputy Secretary of the Treasury. This reporting
relationship is in compliance with section 15(k)(3) of the Small
Business Act. As OSDBU Director, the Assistant Secretary provides
oversight and direction to the Office of Small Business Programs as
well as to the Treasury bureau heads and their procurement officials
in executing the Department's responsibilities under the Small
Business Act. The Assistant Secretary reports regularly to the Deputy
Secretary and other senior officials on small business program
concerns. Senior level focus on small business contracting helped the
Department exceed its fiscal year 2010 small business goal.
In the Department of the Treasury, many officials, including the heads
of the bureaus, their heads of procurement and the Director of the
Office of Small Business Programs (now within the Office of Minority
and Women Inclusion), have responsibilities in implementation of our
small business program. Individual staff members in each of these
areas devote varying amounts of time to small business efforts under
section 15(k)(3) of the Small Business Act. The assignment and
oversight by the OSDBU Director of day-to-day operations pertaining to
small business functions to subordinate officials does not establish
any such other officials as the "de facto OSDBU director." Nothing in
the statute requires that the OSDBU Director must be an official
assigned to small business issues full time.
The GAO report includes a sampling of the benefits of reporting to the
agency head or deputy head as conveyed by OSDBU directors identified
as complying with section 15(k)(3). These same benefits are derived in
the Department of the Treasury with the Assistant Secretary for
Management as the OSDBU Director. The Assistant Secretary's execution
of small business program responsibilities underscores the commitment
of the Department at the most senior levels to our small business
goals and sends a message to the rest of the agency. The OSDBU
Director participates with senior management peers at meetings where
decisions are made and participates in small business outreach and
procurement training events hosted by Treasury. The Assistant
Secretary for Management, as the OSDBU Director, exerts considerable
influence over all acquisition professionals and budget officials at
all levels across all Bureaus toward the attainment of small business
goals.
The Assistant Secretary's leadership with respect to small business
contracting extends beyond the Department. In April 2010, the White
House established an Interagency Task Force on Increasing Federal
Contracting Opportunities for Small Business. The Assistant Secretary
for Management. in the capacity of OSDBU Director, not only
represented the Department of the Treasury on the Task Force, but has
been instrumental in the design of the Task Force year-end small
business goaling campaign.
We urge GAO to recognize that the Department of the Treasury is in
full compliance with both the letter and the spirit of section
15(k)(3) of the Small Business Act. We ask that the draft report be
revised or amended accordingly.
Sincerely,
Signed by:
Kim N. Wallace:
Assistant Secretary for Legislative Affairs:
[End of section]
Appendix X: Comments from the Social Security Administration:
Social Security:
Office of the Commissioner:
Social Security Administration:
Baltimore, MD 21235-0001:
May 10, 2011:
Mr. William B. Shear:
Director, Financial Markets and Community Investment Issues:
Government Accountability Office:
441 G. Street, N.W.
Washington, D.C. 20548:
Dear Mr. Shear,
Thank you for the opportunity to review the draft report, "Small
Business Contracting: Action Needed by Those Agencies Whose Advocates
Do Not Report to Agency Heads as Required" (GA0-11-418). In the
report, you state that we do not comply with section 15(k) (3) of the
Small Business Act because our director for the Office of Small and
Disadvantaged Business Utilization (OSDBU) does not report directly to
our agency or deputy agency head. We reevaluated that reporting
relationship, and the OSDBU director will be reporting to our Deputy
Commissioner, the deputy agency head for the Social Security
Administration. This will bring us into compliance with the Small
Business Act.
If you have any questions, please contact me at (410) 965-0520. Your
staff may contact Chris Molander at (410) 965-7401.
Sincerely,
Signed by:
Dean S. Landis
[End of section]
Appendix XI: GAO Contact and Staff Acknowledgments:
GAO Contact:
William B. Shear, (202) 512-8678 or s [Hyperlink, shearw@gao.gov]
hearw@gao.gov:
Staff Acknowledgments:
In addition to the contact named above, Paige Smith (Assistant
Director), Farah Angersola, Tania Calhoun, Emily Chalmers, Janet Fong,
Colleen Moffatt, Marc Molino, Kelly Rubin, Rebecca Shea, Andrew
Stavisky, and William Woods made key contributions to this report.
[End of section]
Footnotes:
[1] 15 U.S.C. § 644(g). A prime contract is a contract entered into by
the United States for the purpose of obtaining supplies, materials,
equipment, or services of any kind.
[2] Pub. L. No. 95-507, § 221, 92 Stat. 1757, 1770 (1978).
[3] Codified at 15 U.S.C. § 644(k)(3). In 1988, Congress amended
section 15(k)(3) and allowed the Secretary of Defense the discretion
to designate the officials to whom the Defense OSDBU director should
report.
[4] Specifically, paragraphs (4)-(10) of section 15(k).
[5] GAO, Small and Disadvantaged Businesses: Some Agencies' Advocates
Do Not Report to the Required Management Level, [hyperlink,
http://www.gao.gov/products/GAO-03-863] (Washington, D.C.: Sept. 4,
2003).
[6] The remaining noncompliant agency--the Federal Emergency
Management Agency--had been subsumed into the Department of Homeland
Security, which had established an OSDBU with a director reporting to
the highest agency levels.
[7] None of the legal arguments raised by the agencies caused us to
revise our conclusions or recommendations.
[8] GAO, Small and Disadvantaged Businesses: Most Agency Advocates
View Their Roles Similarly, [hyperlink,
http://www.gao.gov/products/GAO-04-451] (Washington, D.C.: Mar. 22,
2004).
[9] The goods and services these seven agencies procured in fiscal
year 2009 accounted for about 76 percent of all federal contracting.
[10] The 20 civilian agencies surveyed were responsible for more than
98 percent of civilian agency obligations in fiscal year 2009. DOD
does not have a single OSDBU director for the entire agency. The
services (Departments of the Air Force, Army, and Navy) and other DOD
command units have established separate OSDBUs, each of which is
headed by a director. These organizational units carry out procurement
for most of DOD. The DOD agencies, as well as some of the other
agencies in our study, refer to their offices as the Office of Small
Business Programs. For simplicity, we use the term OSDBU for all
agencies in this report.
[11] For a complete tabulation of survey results, see GAO, Small
Business Contracting: Survey of 25 Agency Advocates [hyperlink,
http://www.gao.gov/products/GAO-11-436SP], June 2011), an E-supplement
to GAO-11-418 (Washington, D.C.: June 3, 2011).
[12] At the Air Force, we interviewed an official who was the acting
OSDBU director while the permanent OSDBU director was on detail with
another project. We also sent our survey to the acting OSDBU director.
[13] The small business categories include small businesses; women-
owned small businesses; small disadvantaged businesses, including
section 8(a) and non-section 8(a) disadvantaged businesses;
Historically Underutilized Business Zone (HUBZone) small businesses;
and service-disabled, veteran-owned small businesses. Created in 1997,
the HUBZone program provides federal contracting assistance to small
businesses in economically distressed communities with the intent of
stimulating economic development in those areas. The goals for each
federal agency are to award not less than 3 percent of the total value
of all prime contract and subcontract awards for each fiscal year to
service-disabled, veteran-owned small businesses; not less than 3
percent of the total value of all prime contract and subcontract
awards for each fiscal year to HUBZone businesses; not less than 5
percent of the total value of all prime contract and subcontract
awards for each fiscal year to small disadvantaged businesses; and not
less than 5 percent of the total value of all prime contract and
subcontract awards for each fiscal year to women-owned small
businesses.
[14] Under section 15(k), the OSDBU director is to make
recommendations regarding whether a particular contract should be
awarded to a small business under certain programs designed to promote
contracting opportunities for small businesses. Later in this report,
we describe this function as "determining/reviewing individual
acquisitions for small business set-asides."
[15] In 1988, Congress amended section 15(k)(3) and allowed the
Secretary of Defense the discretion to designate the officials to whom
the Defense OSDBU director should report.
[16] At NASA, the Administrator is the head of the agency.
[17] At DLA, the Vice Director is the deputy head of the agency. A
revision to the position description that clarified who would rate the
director's performance was necessary because the Chief of Staff had
signed the most recent appraisal.
[18] The SBA scorecard assigns a letter grade to agencies based on
their small business performance.
[19] The three functions involving contract bundling are (1)
attempting to identify solicitations that involve bundling of contract
requirements, (2) working with agency acquisition officials to revise
procurement strategies for bundled contract requirements to increase
small business participation, and (3) facilitating small business
participation as subcontractors to bundled contracts.
[20] For the two remaining 15(k) functions--maintaining supervisory
authority over OSDBU staff and assigning a small business technical
advisor--we asked only whether the OSDBU director performed the
function.
[21] The SBA Small Business Procurement Advisory Council provides
OSDBU directors with a forum for exchanging information and discussing
policy.
[22] See [hyperlink, http://www.osdbu.gov].
[23] See [hyperlink, http://www.AirForceSmallBiz.org].
[24] These annual reviews also are required to assess the adequacy of
contract bundling documentation and justification, and actions taken
to mitigate the effects of necessary and justified contract bundling
on small businesses. FAR § 19.201(d)(11). Copies of these assessments
are to be provided to the agency head and SBA Administrator. FAR §
19.201(d)(12). According to SBA officials, agencies do submit these
contract bundling reports to them. They also told us that agencies
provide information on contract bundling as part of the SBA scorecard.
[25] The NASA OSDBU tracks the performance of the agency's 11 space
and research centers, including the Kennedy Space Center. Each center
has procurement authority and conducts outreach to small businesses.
[26] The fiscal year 2009 goaling report was the most recent report
available at the time of our review.
[27] See GAO, Small Business Administration: Agency Should Assess
Resources Devoted to Contracting and Improve Several Processes in the
8(a) Program, [hyperlink, http://www.gao.gov/products/GAO-09-16]
(Washington, D.C.: Nov. 21, 2009).
[28] 15 U.S.C. 644(h).
[29] The reports focus on nine elements related to small business
contracting, including agency strategy, top-level commitment,
outreach, data reliability, compliance with policies and procedures,
internal training, and collaboration with SBA.
[30] Interagency Task Force on Federal Contracting Opportunities for
Small Businesses, Report on Small Business Federal Contracting
Opportunities.
[31] The three best practices highlighted were (1) the Department of
Agriculture's women-owned small business program; (2) the Department
of Homeland Security's efforts to promote opportunities for service-
disabled veteran-owned and HUBZone small businesses; and (3) the
Department of Veterans Affairs' (VA) efforts to promote veterans in
business through collaborative partnerships between VA's Center for
Veterans Enterprise, veteran-owned small businesses, and other federal
agencies. For more information, see [hyperlink,
http://www.sba.gov/content/recognizing-best-practices-increasing-
federal-opportunities-small-businesses-0] (accessed on Mar. 22, 2011).
[32] See Federal OSDBU Directors Interagency Council, Model Code of
Expectations Between Federal OSDBUs and Small Businesses, August 2003.
This document identifies the expectations that both small businesses
and OSDBUs should have when small businesses pursue federal
procurement opportunities.
[33] The remaining OSDBU director (Navy) told us that he currently
does not need more resources and his office is working to be a good
steward of its current resources.
[34] The Office of the Secretary of Defense responded on behalf of the
Air Force, Army, DLA, and Navy.
[35] [hyperlink, http://www.gao.gov/products/GAO-03-863].
[36] Our work at these agencies was limited to asking the OSDBU
director to fill out our survey.
[37] We analyzed the Federal Procurement Data System-Next Generation
data for each component within the Department of Defense (DOD) because
it does not have a single OSDBU director for the entire agency. The
Departments of the Air Force, Army, and Navy and other DOD components
have established separate OSDBUs, each of which is headed by a
director. These organizational units carry out procurement for most of
DOD.
[38] The goods and services these seven agencies procured in fiscal
year 2009 accounted for about 76 percent of all federal contracting.
[39] See GAO, Small and Disadvantaged Businesses: Some Agencies'
Advocates Do Not Report to the Required Management Level, [hyperlink,
http://www.gao.gov/products/GAO-03-863] (Washington, D.C.: Sept. 4,
2003).
[40] In 2003, we also determined that one of the seven agencies with
major contracting activity, the Department of Health and Human
Services, was noncompliant. Our list of noncompliant agencies also
included the Federal Emergency Management Agency, but we excluded it
from this review because it is no longer an independent agency; it
became a part of the Department of Homeland Security in March 2003.
[41] We generally reviewed the OSDBU director's fiscal year 2009 and
fiscal year 2010 performance appraisals. However, in a few cases, the
fiscal year 2010 performance appraisal was not yet available.
[42] We published the results of our 2003 survey in March 2004. See
GAO, Small and Disadvantaged Businesses: Most Agency Advocates View
Their Roles Similarly, [hyperlink,
http://www.gao.gov/products/GAO-04-451] (Washington, D.C.: Mar. 22,
2004).
[43] We did not survey the Department of Homeland Security in 2003
because it was still in the process of being established.
[44] The survey was launched by electronically distributing
information on accessing the survey to the OSDBU directors. Each OSDBU
director was issued a unique username and password to access the
survey.
[45] The survey was left open after November 22, 2010, for the four
OSDBU directors who had started the survey but did not complete it
until December 29, 2010.
[46] The Assistant Secretary for Administration is also the Chief
Financial Officer.
[47] Since 2003, the name of the office had changed from the Office of
Finance, Assessment, and Management to the Office of Budget, Finance
and Management.
[48] Until March 2011, the Director of the Office of Small Business
Programs reported directly to the Assistant Secretary for Management.
In March 2011, pursuant to Section 342 of the Dodd-Frank Wall Street
Reform and Consumer Protection Act (Pub. L. 111-203), Treasury
established an Office of Minority and Women Inclusion, whose director
reported directly to the Assistant Secretary for Management.
[End of section]
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